RECRUITMENT firms and organisations such as charities, care homes and financial services businesses, will all be hit hard by the removal of an important tax concession from this week according to accountancy firm Baker Tilly.
The withdrawal of the staff hire concession, which was announced at last year’s Budget, means recruitment agencies must now charge VAT on their commission, as well as on the salary of temporary workers.
Many businesses and organisations that hire temporary workers but cannot recover all the VAT they are charged on costs, will be affected. Charities, care homes, financial services businesses, healthcare providers, schools and higher education establishments are among those which face increased costs.
Graham Garner-Jones, tax partner at the Chester office of Baker Tilly, warned: “There are a large number of organisations that cannot recover in full the VAT they are charged.
“As a result the removal of this concession may make hiring temporary staff financially unviable.
“Recruitment businesses are also aware that they could see their turnover plummet as organisations shy away from hiring temporary workers.
He added: “Numerous representations were made to the Treasury by a number of agencies, but it appears that this has been to no avail.”
