This guidance note provides an overview of the VAT treatment of supplies of staff. Businesses that are involved in supplying staff in the healthcare sector should read the Welfare ― supplies of staff guidance note for more information.
What constitutes a supply of staff?
Businesses are treated as making a supply of staff when they provide one of the following to another organisation in exchange for any form of consideration:
an individual who is contractually employed or engaged by the business
a director of the business
It is not necessary for there to be a formal contract or letter of appointment for there to be a supply of staff and staff supplied on less formal basis come within the scope of these provisions.
The most important requirement is that the member of staff is not contractually employed by the recipient who receives the individual, but comes under the recipient's direction. If the business provides services, such as catering, construction and healthcare, to another party and the staff remain under the supplying business' control and direction, this is not a supply of staff but a supply of catering / construction / healthcare, etc. This is important to remember if the services provided could be liable to VAT at the reduced or zero-rate, or be exempt from VAT. Also if the services are provided to a customer in another country, different VAT rules may apply and more information can be found below.
A business may be approached by another business with a