Agencies 'to find £125m for extra VAT'

Recruitment agencies in the UK will have to pay a cumulative £125 million as a result of the new Budget, according to one organisation.

The Recruitment and Employment Confederation (REC) has claimed that as a result of the chancellor's decision to remove staff hire concessions - which places tax on the commission rather than whole cost of placing temporary workers - agencies will have to foot the bill.

Financial services and banking, as well as other sectors such as care homes, charities and private hospitals may be hit the hardest as they cannot reclaim the VAT, the REC asserts.

Fiona Coombe, director of professional services at the REC, commented: "The cost of taking on vital temporary staff will rocket in sectors where they cannot reclaim the VAT charged to them

"The regulatory impact assessment conducted by HMRC on this issue fails to assess the financial impact for the client organisations which will now have to find an extra £125 million a year to pay the VAT."

Meanwhile, the REC has welcomed the government's decision to boost skills and help small businesses.

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