The Upper Tax Tribunal (UT) has rejected Adecco’s appeal against HMRC’s refusal to repay VAT paid on workers’ remuneration. The UT held that Adecco must account for VAT on the full value of the consideration they received for the supply of temporary workers.

Following the decision in Reed Employment Ltd v HMRC, in which the First-tier Tribunal (FTT) confirmed that VAT was chargeable only on the commission element, Adecco sought repayment of VAT paid on the remuneration element. HMRC rejected the claims.

On appeal, the FTT confirmed HMRC’s decision and concluded that VAT was due on the full amount paid to Adecco by its clients, including the amounts paid out by Adecco to the workers.

Adecco appealed to the UT arguing that it was providing only introduction and payment services and that it could not be making an onward supply of the workers’ services because it was not consuming those services itself.

In reaching its decision, the UT placed a great deal of emphasis on the agreements between the parties and the fact that there was no contract or other agreement between the client and the worker. The workers gave no undertakings to the clients that they would perform the work, and the clients were not contractually obliged to pay the workers.

“Whilst it is unsurprising that the Tribunal came to this decision, it does not resolve the issue once and for all, as there remains a conflict with the earlier decision of the First Tier Tribunal in Reed” said Fiona Coombe, SIA Director of Legal and Regulatory Research.