Increase in VAT on agency staff costs
2nd September 2008, 10:16 am
Voluntary organisations which can’t recover VAT (in full or part) need to ensure their budgets from April 2009 take into account VAT charged on the whole costs of employing staff via an agency (or other third party).
Currently the tax is (or should be) only charged on the agency’s commission or management fee, not on the salary itself, but this arrangement will cease from 1st April 2009. More details on Sandy Adirondack’s Legal Update at http://www.sandy-a.co.uk/managing.htm#vat-staff.
March 18th, 2009 at 10:23 am
I will shortly be retiring as chair of Adepta, a £27m charity supporting people with learning disabilities, autism, challenging behaviour and mental health challenges. Over more than 30 years’ involvement in leading charities in the social care sector, I’ve witnessed many very unhelpful and unfair decisions by the government of the day. But this latest decision to apply VAT to the whole cost of using agency staff ‘tops the bill’ for sheer ineptitude.
However well run the organisation, the use of agency staff is an integral part of balancing the need for flexibility with that of controlling overheads. Few organisations operate without this form of ‘backstop’. And of course the agency care industry does provide significant employment opportunities for those who want a more flexible working lifestyle.
This ridiculous decision effectively adds £300k straight on to our costs with resolute resistance from commissioners to accept that as a legitimate cost increase, brought about by Government edict alone.
So the third sector, which we keep being told provides an invaluable resource in the UK, is being raided shamelessly in order, presumably, to help towards bailing out those institutions that have acted irresponsibly.
And before any Whitehall mandarin replies that this is a European directive and out of our hands, let me just offer a simple, legal and entirely justifiable solution: Instruct all commissioners to accept the additional cost!