VQOTW: April 2020 IR35 changes and Employment Businesses

My client is a limited company employment agency business.  Working in the transport sector they act as principal making supplies of temporary drivers, some of whom work through their own VAT registered personal service companies. The temporary workers are paid a daily rate plus VAT. We understand that the “off-payroll” measures introduced with effect from 1st April 2020 will require persons working through “employment intermediaries” to be subject to IR35 payroll deductions. How will this affect the VAT charged on the supplies made to the recruitment business client by the personal service companies?

The simple answer is that nothing changes in relation to the VAT. There is still a taxable supply of staff/services from the VAT registered personal services company to the employment agency.  VAT is still calculated on the full value of the supply: no account is taken of any payroll deduction made.

In this case, the value of the supply is based on the daily rate. If the daily rate is £100, the value on which VAT is calculated will be £100, not £100 less any payroll deductions.


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Senior VAT Consultant
0844 892 2470


Hilary has worked in VAT since 1997, including five years with HMRC as an Assurance and Enquiries Officer. She spent eight years as a VAT manager, initially with a mid-tier accountancy firm, followed by six years with PricewaterhouseCoopers.

She has both advisory and compliance experience, working with a wide variety of clients ranging from small owner-managed businesses, to not-for-profit organisations and large multinational corporations, on the full range of VAT technical matters.

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