new vat rules for temps
The changes to the VAT rules in the budget which apply to temporary staff will make the cost for certain sectors rise. Employment agencies are currently able to exclude the wage element from VAT and only charge it on their margins.
Ann Swain of The Association of Technology Staffing Companies(ATSC) said
"If organisations have to pay VAT on temps' pay and not just the recruiters' margin, the cost of using temps is going to rise significantly. The Government is forever praising the contribution temporary workers make to UK competitiveness but, if VAT is charged on fees, organisations may use fewer temps and the flexibility of the labour market will be compromised."
Chancellor Alistair Darling's March 2008 Budget proposes to withdraw the concession from April 2009. This will principly affect sectors such as banking, health, insurance and charities. Business who are exempt for VAT and cannot reclaim the charge.
Source: Independent, March 13 2008
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