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The Treasury are due to remove the tax concession granted in 1998 to recruitment agencies supplying temporary workers to the social housing, charity, social care and health sectors. The measure, which will take effect next April, means that social landlords will pay VAT on full invoice amounts for temps, rather than just agency commission, a tax that many housing organisations can't reclaim.
In a meeting with HMRC and the Treasury last week, the REC and PfH again called on Government to reconsider removing the tax concession, explaining that the rapidly worsening economic outlook is now really starting to bite in the jobs market with temporary appointments dropping swiftly. At the meeting the REC and PfH explained that with demand for workers declining at its fastest pace since October 2001, it is essential that the Government ensures new measures do not exacerbate the trend.
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PfH surveyed its Member housing organisations to measure the impact of imposing VAT on the wages of temporary workers. Over 80% of respondents confirmed that they could not reclaim the tax on all interim staff as they are not VAT registered. Other social landlords reported that they have subsidiaries with charitable status, meaning they are zero rated for VAT purposes, so some temporary workers are tax exempt and others are not.
PfH's survey revealed that each housing association and ALMO estimated they would have to pay an additional£108k per year, a cost of more than £70m to PfH's 650 Members alone. The REC estimates that the overall cost, across all sectors, will be £400m.
The REC is now working with PfH, the Charity Finance Directors Group, English Community Care Association and the Association of Colleges to explore options to mitigate the cost of withdrawing this VAT concession.
(CD/JM)
