REC officials are urging the government to delay the impending requirement for agencies to pay VAT on the wages of temporary workers they supply.

The effect of withdrawing the Staff Hire Concession, due to take place on 1 April, will be to increase the cost of staffing to agencies and their clients. 

Currently, agencies supplying temporary workers to certain industry sectors pay VAT only on their margin. Potentially affected sectors are those that cannot fully recover the VAT charged to them, such as finance, health and care, education, charities and some parts of the public sector.

“We’re quite clear this isn’t the right time to be doing this,”  Anne Fairweather, head of public policy at the REC, told Recruiter.

Following a meeting with Treasury officials last week on the VAT Staff Hire Concession, Kevin Green, chief executive of the REC said: “We used this meeting to press home the concerns of members that the removal of the staff hire concession will reduce temping opportunities in the affected sectors.

“It is clear that the Treasury are considering the impact of the concession carefully and are keen to understand how agencies may be using alternative business models to mitigate the effect of the removal of the concession. It is possible that they may allow more time for these models to be put in place.”

Further information will be presented to the Treasury by the REC on how much time agencies will need to implement alternative business models with clients. 

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