Currently staffing agencies, where supplying temporary staff, are obliged to invoice their clients for their entire charge inclusive of workers’ pay. VAT is chargeable on the full sum. 

A statement from ARC said: “Under the concession, which was abandoned in April 2009, staffing agencies were able to invoice their hiring clients with no VAT charged on the value of workers’ pay. This was particularly helpful for those hirers who were VAT exempt and could not offset their VAT pay-outs against VAT inputs.”

VAT exempt organisations include charities, public sector organisations including the NHS, care sector operations and local authorities, all of whom are currently hard-pressed for funds. ARC contends that a reinstatement of the concession would provide much needed support for those sectors, saving 20% of the temp pay rate, as well as reduced administration and restore some more flexibility, which in turn helps both workers and businesses.

ARC’s proposal comes when it is widely reported that the chancellor is considering reducing VAT and income tax.

• Comment below on this story. Or let us know what you think by emailing us at [email protected] or tweet us to tell us your thoughts or share this story with a friend.