Care homes could face VAT bombshell for agency staff
By ANDREW NOBLE, head of tax, Browne Jacobson LLP
More than 17,000 care and nursing homes could be facing a VAT bombshell this year as the Government implements changes to the VAT applied to the recruitment costs of hiring temporary staff.
Over the last few years the UK Government has operated a concession, so that employment agencies only have to charge VAT on their ‘commission’, when they supply temporary staff to a business which pays these temporary workers direct or via a third party payroll. So a care home could have hired some agency cover, and not had to worry too much about the VAT cost. But after a period of consultation, this concession is being withdrawn as of 1st April 2009.
So from 1st April 2009 an employment agency will have to charge VAT on the wages element, as well as its ‘commission’, when it supplies temporary staff to its customers. For most UK businesses this should only lead to a problem of managing cashflow, assuming that the business can normally recover from HM Revenue & Customs (HMRC) the VAT which it incurs on its co