A long-awaited judgment of the First-Tier Tax Tribunal (Adecco v HMRC) has just been released. Adecco has lost this round of its Deloitte-backed case against HMRC, in which Adecco argued that it should only have to charge VAT on margin rather than on the full cost of staffing supply.
Until 2009 staffing companies were allowed to choose just to charge VAT on their margin. HMRC then withdrew the Staff Hire Concession (SHC) (which had been the basis on which staffing companies were given this choice), and from then expected staffing companies to charge VAT on the full amount of what they charged clients. This made staffing supplies more expensive for banks, insurers, some educational establishments, charities and healthcare providers (none of whom can recover the VAT which staffing companies charge them).
Reed Employment was successful in a First-Tier Tribunal case on similar facts (albeit for a period which went back to before the removal of the SHC) which was decided in 2011.