Charity employers of temporary staff could face a large hike in their VAT bill because of proposed DTI regulations.
Employers have until November to respond to the proposals and changes to the law are expected by the end of the year.
Agencies supplying workers to charities only charge VAT on their commission and money paid to the agency for temps' wages is not taxed. But under the DTI's proposed change to regulations, employers will pay VAT on wages and the agency's commission.
This will be done by making it illegal for an agency which introduces a worker to a charity to also pay the workers' wages.
Accountants Pricewaterhouse-Coopers has warned that while the majority of the voluntary sector won't be affected, large charities could be hit.
Janis Humberstone, manager of tax and legal services, said: "Some big charities do have a significant spend on agency staff. So why not introduce a concession similar to the home-care concession for those charities that are affected?"