Commentary

BB/7/97 Statement of practice on VAT treatment of staff hire

Part V16 Forms and other HMRC material

BB/7/97 Statement of practice on VAT treatment of staff hire

BB/7/97 Statement of practice on VAT treatment of staff hire

Business Brief, Issue 7. 25 March 1997

Customs and Excise have announced details of new arrangements affecting VAT on staff hire. These will come into effect from 1 April 1997.

The new arrangements will replace the current informal concession which allows any business hiring out staff not to charge VAT on the salary costs of the staff concerned if the client business pays the staff direct. As announced in the Budget [Customs and Excise Budget Press Notice No B/11/96, this concession is being withdrawn because of attempts by a number of services contractors to use it unfairly to avoid tax.

These new arrangements have been introduced as a result of representations received during a post Budget consultation exercise. Customs would like to thank all those who contributed.

A short explanation of the new arrangements is given below, and the full text is set out in the Statement of Practice included at Annex A.

Hire of staff by employment businesses

The arrangements in Section A of the Statement of Practice were announced in Business Brief No 4/97. They apply where an employment business within the meaning of the Employment Agencies Act 1973 supplies a member of its staff to another business.

They require that the business hiring the employee is responsible for paying their remuneration, and/or for discharging the obligations of the business supplying the employee to pay PAYE, national insurance contributions, pension contributions

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