VAT bombshell in new EAA Regulations

I would like to alert agencies to watch out for regulation 8 of the new rules pertaining to the Employment Agencies Act (EAA) due to come into force on 6th April .

The regulation requires that employment agencies supplying Temporary workers will have to stop or become employment businesses and charge VAT on the value of their whole invoice not just on the fee element. This will mean extra costs for organisations that cannot reclaim VAT, notably the NHS which employs thousands of Temporary workers via agencies. The cost of recruiting temporary staff will increase with end users paying up to five times the amount of unrecoverable VAT they are now.


We at CashFriday are working with advisors to see if we can find a way to both comply with the regulation and help hirers, such as the NHS, keep their costs down. My understanding is that the intention of legislators was to clarify who the worker is employed by in such arrangements but a sad consequence is to significantly increase the Temp wage bill for the NHS and others who cannot claim back VAT.