Timesheet Rostering Software | Staff Management Software | Temporary Staff Software | Nurse Bank Software | Nursing Agency Software | Employee scheduling software

There has been a ripple of reaction to the court ruling generally disallowing VAT on commission only for temporary staffing Agencies. This issue has no doubt resurfaced because of the activation of the Agency worker regulations.

At the end of last year Reed tried to take on HMRC over paying VAT on the commission element rather than the full invoice amount. Those of you that have been around long enough know that some agencies used to be able to pay/charge VAT on the commission element (only) of the Invoice.

Paying VAT only on commission would make a considerable difference to company's costs. It could reduce the VAT bill by in the region of 80%. In the end the ruling unsurprisingly was on the side of HMRC. This was one of those "invisible" taxation increases so beloved by the last Labour government.

The ruling simply revolves around the "principal" method of supplying workers. The principal is:

• The Agency identifies a worker for a vacancy or post and has a contract to that effect, and as consequence has no further involvement in the payment of the worker for work done for the hirer.  
• On the other hand, if the Agency does pay the worker: directly or via an intermediary company, then the VAT is payable on the full transactional amount.

Links which may be of interest

The Actual HMRC brief on payment of VAT for Agencies