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HMRC’s have explained their VAT policy following the First-tier Tribunal decision in Reed Employment Ltd (TC1069).
The tribunal held, that in providing temporary staff to its clients, Reed was supplying introductory services rather than making supplies of staff. The company therefore had to account for VAT on the commission element of its charge and not on the overall amount paid by the client.
Given that First-tier Tribunal decisions cannot set a precedent, HMRC say they do not consider Reed as having wider impact.
Their view of the correct VAT treatment for employment bureaux remains that set out in information sheet 03/09.
In essence, a bureau acting only as an agent has to account for VAT on its commission, whereas a bureau acting as a principal has to account for VAT on the full amount charged to clients.
For full details, see Revenue & Customs Brief 32/11.
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