REC urges HMRC to review increased tax burden on temporary jobs

The Governmentís decision to withdraw the VAT Staff Hire Concession from April 2009 will add huge cost to the recruitment of temporary staff at a time when businesses and the jobs market can least afford it. This concession was always intended as a short-term measure, but the REC is meeting this week with HMRC in order to discuss possible solutions.

An estimate by the Recruitment & Employment Confederation (REC) – the representative body for UK recruitment agencies - is that removing this concession will add 400 million to employersí costs and could ultimately result in thousands of temporary job opportunities being lost.

Commenting on the issue, REC Chief Executive, Kevin Green says: ìThe net result of having to add VAT to the overall cost of taking on temporary and contract workers is likely to be less flexibility, higher costs for UK businesses and fewer jobs available. We are looking for constructive discussions on how we can avoid the fallout from the added costs that the removal of this concession will lead to, at a time when the UK economy can least afford it.î

The removal of the concession will have an impact in sectors which are not able to reclaim the VAT that will be charged on the wages of temporary staff from April 2009.

Specific examples include:

ï Health care sector: costs will soar as VAT is charged on the wages of locum doctors and specialist medical staff supplied through agencies

ï Charities: one charity has estimated the cost at 1.6 million a year

ï Social Housing: it is estimated that the cost to the sector could be 135 million

ï Further education: the annual cost to English Colleges could be 20 million

ï Financial services sector: the cost to investment banks is estimated at 50 million and in the retail banking sector over 25,000 jobs are caught up in temporary staffing. In the current economic uncertainty, is now the time to raise the cost of staffing in the financial services sector?