The Recruitment & Employment Confederation (REC) understands that HM Revenue & Customs (HMRC) has decided not to appeal the recent tribunal decision on how VAT for the provision of temporary staff should be calculated. The issue is whether the first-tier tribunal ruling sets a clear precedent. The REC will continue to work with members and HMRC officials to assess the potential impact.
 
In the case between Reed Employment and HMRC, the tribunal found that the recruitment company should only have had to charge VAT on the commission for finding a temporary worker, and not on the actual wages paid to the worker. This was the legal interpretation that was applied until 2009, under what was known as the 'staff hire concession'. The risk is that recruiters providing temporary workers may be seen to have charged their clients too much tax for the last two years. The ruling may particularly affect clients unable to recover VAT they incur, such as financial services, insurance, education and healthcare businesses, and charities.
 
Tom Hadley, Director of Policy and Professional Services at the REC, said "there has been some debate over the implications of the tribunal ruling. It has been argued that it does not necessarily set a precedent as this was only a first-tier Tribunal and the judgement was based on a very specific supply model. However, recruiters and their clients will clearly want to look into this further, especially if there is an opportunity to recover VAT payments."