Corporate Strategy & Finance - Review

    July 2009

    Conceding to the VAT man - the withdrawal of the staff hire concession

    What is the Staff Hire Concession?

    After threatening to do so for a number of years the Government finally announced at the 2008 Budget that the VAT staff hire concession (the "Concession") would be withdrawn with effect from 1 April 2009. The Concession was introduced as a temporary measure in 1997 to prevent the distortion of competition between employment agencies ("Agencies") some of which were benefiting from VAT-free arrangements.

    The Concession allowed Agencies to charge VAT only on their profit margin on the supply of temporary or self-employed workers ("Temporary Workers") to other businesses. However, after a public consultation HM Revenue and Customs ("HMRC") decided that the Concession was contrary to EU VAT law and should be withdrawn. From 1 April 2009 onwards VAT must now be charged on the gross value of any supplies of Temporary Workers, including the Agency's profit margin, the wages and holiday pay of the Temporary Worker and any national insurance and pension contributions payable by the Agency.

    In May 2008, international law firm Hammonds became a limited liability partnership. Hammonds LLP and its affiliated undertakings has offices in Birmingham, Leeds, London and Manchester in the UK, and in Berlin, Brussels, Beijing, Hong Kong, Madrid, Munich and Paris.