Cost of using temporary workers set to rise in April 2009 through VAT offset

Date: March 14, 2009

The directive “Agency Workers Directive” which acts to offer the same rights to temporary workers and contractors, serves as a double edged sword with VAT concessions being withdrawn for end user companies paying through umbrellas.

Companies unable to reclaim VAT such as financial services companies or small businesses may be eligible to pay VAT on contractors and temporary staff full wage rather than VAt only on the recruitment companies’ fees. This could add a huge burden to non VAT companies and change the way temporary staff are paid and recruited.

Legislation is currently being agreed in the UK along with European Union Directives, which may see temporary workers laws change in April 2009.

The support for contractors and temporary staff working within an end user company in receiving equal rights as their peers holding full time jobs (with some exclusions) is deemed as a step in the right direction for contractors as it allows fluidity in the UK employment market as well as fairer employment rights, however with extra VAT liabilities falling with the end user, the use of temporary contract staff may well drop in 2009. Coming at a time when UK unemployment levels are rising daily currently standing at the 2 million mark this delivers a further blow to the UK economy and another stranglehold on a dwindling employment market.

Progress from the directive can be followed at the BERR Department for Business, Enterprise & Regulatory Reform.

UK Contractors working in any field should consider opting for an umbrella company such as  OrangeGenie who will always undertake to pay our staff quickly, efficiently and with the minimum of fuss. Why not call us on 0845 603 8088 and we will offer you any advice relating to our umbrella services.