Temporary staff hire tax move 'will cost one charity £300k a year'

By Helen Warrell, Third Sector Online, 13 March 2008

One large charity is due to be hit with a VAT bill of £300,000 extra each year as a result of one measure in today's Budget, according to the Charity Finance Directors' Group.

Chancellor Alistair Darling’s Budget statement said the Government would remove VAT concessions on staff hire for temporary workers, with effect from 1 April next year.

At the moment, UK organisations pay VAT only on the fees charged by agencies that supply temporary staff. Under the new rules, VAT will now be chargeable on the temporary worker’s full salary, as well as agency commission and any national insurance contributions and pension costs.

The announcement will not affect businesses that are able to re-coup VAT on the costs of imported services, but organisations such as charities that are wholly or partially VAT-exempt will not be able to reclaim the new VAT costs, and therefore face a highly inflated VAT bill.


The Treasury is thought to have estimated that this will cost the sector £20m a year.

Keith Hickey, chief executive of the CFDG, said: “Our consultation with members on this issue has shown that there are very large sums involved. One large charity we spoke to said it would increase its VAT by £300,000 each year.”

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Douglas Campbell

Douglas Campbell, 13 March 2008, 15:45

Surely any charity that is spending £1.7 million each year on the wages of agency employed staff needs to rethink how it works.

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