Potential VAT Opportunity - Have You Employed Agency Workers since 2009?

Potential VAT Opportunity for Charities, Social Housing Providers, Care Homes, Financial Institutions and other 'VAT Sensitive' Organisations - Action Required Now!

In this short article, Gemma Gower, VAT Specialist at Mitchell Charlesworth outlines a potential opportunity for VAT sensitive organisations to reclaim VAT that may have been paid on Employment Agency fees since 1 April 2009.

This opportunity is time-sensitive and, if relevant to your organisation, requires immediate action for you to gain maximum benefit.

  • Background to this potential VAT opportunity:
Image Courtesy of Stuart Miles / freedigitalphotos.net

Some VAT sensitive organisations (such as Charities, Social Housing Providers and Care Homes) rely on Agency workers during periods of essential maintenance and also and to cover peak periods, holidays, maternity periods and sickness.

Since the withdrawal of the exemption for staff hire, Employment Agency fees have been subject to VAT in its entirety. For VAT sensitive organisations, this has increased the overall cost of employing agency workers.

In March 2011, the First Tier Tribunal ruled that Reed Employment Limited's supplies were that of "introducing temporary staff to its clients" and therefore, VAT was only due on the commission it received for the introduction, rather than on the entire employment cost of the temps (i.e. Salary, NICs, Tax).

HMRC issued Business Brief 32/11 stating that the decision was binding for Reed alone, and that other agencies must continue to charge VAT on the amounts received from hirers in their entirety. This has led to a significant distortion of competition, with other Employment Agencies now appealing this inconsistency. As a result, many are set for litigation with HMRC later this year.

  • How could this affect your organisation?

If you have used Employment Agencies for staff in the period since 1 April 2009 (ie employed temporary staff), then there is a genuine opportunity to put in a protective claim for overpaid VAT, pending the outcome of the proposed litigation. Clearly the outcome of the litigation remains to be seen, but we are taking the Reed case as a positive indicator of potential success.

In order to protect any VAT claim you may be entitled to, you are urged to act quickly, as time is running out to make a protective claim for the earliest VAT period following 1 April 2009.

We are currently liaising with many VAT sensitive organisations with a view to submitting protective claims, ensuring that in the event of a favourable outcome of litigation, our clients are fully compensated for the VAT costs they have incurred.

  • For more information - Arrange a No Obligation Discussion:

If you would like to know more about this potential VAT opportunity or to arrange an initial no obligation discussion, please do not hesitate to contact Gemma Gower on tel: 0151 255 2300 or alternatively email: gemma.gower@mitchellcharlesworth.co.uk.

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