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UK – Recruiters worried about VAT schemes used by NHS

05 March 2013

Recruiters are worried about the legitimacy of value added tax (VAT) schemes which cuts spend on agency staff within the National Health Service (NHS). The Recruitment & Employment Confederation (REC) has now written to health services minister Daniel Poulter to clarify whether these schemes are really legitimate.

The REC said that Her Majesty's Revenue and Customs (HMRC) has so far not made a clear ruling about the legitimacy of the schemes which, it says, are spreading rapidly across the health service.

The NHS has come under increasing pressure to manage cost controls amid budget cuts. The schemes allow “NHS organisations to reduce the VAT element of their non-nursing agency spend by allowing them to directly employ work-seekers for a short period through a staff agency procurement outsourcing service,” the REC said.

Chris Wilford, senior policy & PR advisor at the REC, said: “Temporary and locum staff are an indispensable element of the NHS workforce, helping organisations meet fluctuations in demand and cover unexpected absences.

“Whilst we appreciate the financial constraints many NHS organisations are currently facing, we are very concerned that there continues to be no clear guidance or statement from the Department of Health about the legitimacy of such schemes. This is creating a significant risk for NHS organisations if HMRC deem these schemes to be illegitimate.”

He said that REC members firms have been pressurised to enter into such schemes. “While there is a real question as to the validity of these schemes we will be advising them they should exercise caution before entering into these arrangements with any NHS trust until HMRC have made a decision on their status. We urgently need government to give the sector a clear steer on this issue,” said Mr Wilford.

Although they have not been named in the statement from the REC, an obvious target of their concern is VAT consultancy, Liaison, which offers a “unique staff agency procurement outsourcing service” run in partnership with PwC called STAFFflow. The company claims that NHS trusts can save £130,000 per £1 million spent on non-nursing agency workers using web-based software to provide an “easy and efficient way to employ staff directly, even if you only need them for a single shift”. Over 50 trusts and health boards have already signed up for STAFFflow and the company claims that more are due to go live within weeks. The company also claims that the scheme has been devised, researched and tested by a team of legal and HR experts and that their clients can be “confident that the necessary legal requirements are met”.


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