Supplies of Temporary Workers – VAT Position

The First-Tier Tribunal recently heard a case that could have wide ranging implications for many businesses supplying temporary workers (and for their customers). The Appellant, Adecco, disagreed with HMRC’s decision that output VAT was chargeable on the entirety of the fee collected for the provision of temporary staff reasoning that VAT should only be due on the introductory element (a service provided by Adecco) and not the workers’ pay element given that Adecco considered that it was acting as an agent. This appears to be in line with the First-Tier Tribunal decision regarding Reed Employment Limited, which was decided in favour of the taxpayer 2011.


However, upon hearing this case, the First-Tier Tribunal’s ruling did not reflect the decisions made in previous cases regarding similar matters. It concluded that Adecco acted as a principal in these circumstances as opposed to an agent, indicated by the fact that it was Adecco who paid the temporary workers with the costs then being charged on to the client. This was supported by the contracts between Adecco and the temporary workers which were reviewed as part of the case and revealed that the onus to pay the workers lay with Adecco, independent on whether the clients provided payment to Adecco.


As no direct relationship between the worker introduced by Adecco and the client could be established, Adecco were liable to account for VAT on the full consideration as it was making the supply as a principal rather than as an agent.


If your business makes use of temporary workers and you are unsure of how this decision may affect you, call our free helpline for advice.

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