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Reed Employment Limited v HMRC Developments in the VAT treatment of Employment Businesses

Reed Employment Limited v HMRC – Developments in the VAT treatment of Employment Businesses

HMRC has published a VAT bulletinon the ruling of the First Tier Tax Tribunal in the matter of Reed Employment Limited v HMRC. The bulletin outlines the Revenue’s position in the light of the ruling, namely that it has no wider implications as the case referred to a very specific set of circumstances and contractual provisions in a particular period of time up to 1996.

Since that time, the combination of the introduction of Conduct of Employment Agencies and Employment Businesses Regulations 2003 (”the Conduct Regs”)  – in particular Regulation 8, and the changes to the rules for the charging of VAT in April 2009, has meant that the conditions pertinent to the Reed case no longer exist and as such the persuasive arguments employed by Reed’s counsel could not apply to a similar situation today.

Notwithstanding this position, the ARC is resolved in its current campaign pressing for the government to reconsider the VAT position for charity and public sector hirers of temporary workers and to review regulation 8 of the Conduct Regs in the context of today’s market conditions.

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