VAT payable on full cost of temporary farmworkers warn advisers
© David Cole/REX/Shutterstock Farms and rural businesses that hire temporary staff through an agency must continue to pay VAT on the wages of the workers and not just on any commission that is due.
A tribunal has ruled that VAT at the standard rate is due on all amounts charged to a client for the supply of temporary workers’ services, which could include salary, national insurance and pension contributions.
It follows an unsuccessful challenge by global HR staff provider Adecco, which tried to argue that VAT should only be charged on the part of the payment that related to its commission for introducing the worker to the business using them.
David McGeachy, partner and VAT specialist with the landed estates and rural business group at accountant Saffery Champness, said: “Essentially, the tribunal has found the client received the services direct from the temporary worker, but the obligation to pay arose from its contract with Adecco [there was no contract between the client and the temporary worker], meaning that it was correct that they were taxed on the full value of the supply received, in accordance with EU VAT principles.”
Mr McGeachy said a farmer who was hiring out staff to a neighbour – perhaps to help at a busy time – was also required to charge VAT on the full bill.
But he added: “It’s only really a big issue if you are not able to recover all your VAT. Many farmers are able to, although some of the bigger estates won’t be because they have a residential property portfolio and renting cottages are VAT exempt, so they are not able to recover all the VAT on their costs.”
Adecco is expected to appeal the ruling.