A warning to agencies on how they should charge VAT
In a recent ruling, (Adecco UK Ltd & Ors v Revenue & Customs  EWCA Civ 1794), released on 6 August 2018, it was decided that an employment business should be charging VAT on total fees charged to the client, not just on the introductory fee for temporary workers.
Although HMRC had not appealed a previous decision where VAT was charged on commission only at the time, they were able to successfully defend their opposing view in this case. A number of facts were considered, including who the contract was between and who was making the payments to workers.
Furthermore, it was also pointed out by the judges that the contractual obligation in relation to services, no doubt very clearly stated in the contract, isn’t always the same as the supply being provided in the VAT world and that it is, therefore, vital to look at what is happening in the business in commercial terms.
Following this ruling it’s worth considering if your business needs a contracts review or whether you need to implement changes to how you do business with your clients.
This case illustrates how difficult it can be to identify supplies taking place for VAT purposes in the first place. We recommend that you seek professional advice to ensure you don’t also fall foul of the taxman. Please do not hesitate to speak to your local MFW office. We have offices conveniently situated across Kent in Ashford, Cranbrook, Dover, Herne Bay, Maidstone and Sittingbourne or, alternatively do call me if you have any queries.
Daniela Jarosova, ACCA CTA