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U.K. tax change may mean fewer temps

March 30 2009

A change in United Kingdom tax law taking effect Wednesday, April 1, would increase the amount of tax some staffing buyers pay for temporary workers. And the Recruitment and Employment Confederation, the trade group for staffing in the U.K., estimates that 150,000 temporary jobs could be at risk.

The "VAT staff hire concession" rule that let staffing buyers pay VAT (value added tax) on staffing firms' net fees is set to go away. Firms will have to start charging VAT on the full cost of temporary workers, including pay and other costs when the concession ends Wednesday.

The change will be significant mainly to staffing buyers in the financial, healthcare, social services and charity sectors, who can't reclaim their VAT in full, according to the half-year report from Hays PLC, the U.K.'s largest staffing firm. Hays reported that GBP20 million (US$28.6 million) of its net fees per year are generated by workers placed under the staff hire concession.

The withdrawal of the concession was first announced March 12, according to the U.K.'s HM Revenue & Customs. The agency said, based on a review that began in 2006, the concession wasn't supported by European Union or U.K. law, and was, therefore, illegal.

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