HMRC urged to keep temporary staff tax concession

3 October 2008

Representatives of the recruitment industry are calling on the government to reconsider a tax change that could add millions to the cost of taking on temporary staff.

The government announced in the Budget that the VAT staff hire concession is to be dropped as from April 2009.

The fear, however, is that scrapping the concession will hit those employment sectors, including financial services and charities, that cannot reclaim the VAT that will be chargeable on the wages of temporary staff.

Although the concession was intended as a short-term measure, recruitment groups are urging the government to discuss a possible solution.

The Recruitment and Employment Confederation (REC) has met with HM Revenue and Customs (HMRC) to address the issue.

The REC said that the decision to withdraw the VAT staff hire concession will add a huge cost to the recruitment of temporary staff at a time when businesses and the jobs market can least afford it.

It is estimated by the REC that the change could mean an extra £400 million in employment costs and could see the loss of thousands of temporary job opportunities.

Kevin Green, the REC’s chief executive, said: “The net result of having to add VAT to the overall cost of taking on temporary and contract workers is likely to be less flexibility, higher costs for UK businesses and fewer jobs available. We are looking for constructive discussions on how we can avoid the fallout from the added costs that the removal of this concession will lead to, at a time when the UK economy can least afford it.”