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HMRC internal manual

VAT Cost Sharing Exemption Manual

General provisions: What are the normal VAT rules regarding transfers/supplies of staff?

There is a supply of staff for VAT purposes when one party makes available someone who is contractually employed by it or is a director of it to another party (either on a temporary or a permanent basis) in return for a consideration.

Where such a supply is on a temporary or secondment basis the consideration for such a supply need not necessarily be just a fee but can also constitute charges made by the contractual employer to the other party of wages, NI and other employment costs. It also includes such costs when they are paid by the recipient of the supply directly to the worker.

Whatever the nature of the business (it does not have to be an employment business), the party making the supplies of staff is normally regarded as making such supplies in the course or furtherance of business and must account for VAT at the standard rate.

There are a few exceptions to this rule, where supplies of staff are not always made in the course or furtherance of business and thus may be outside the scope of VAT.

Further information about the permanent and temporary transfer/supply of staff, the exceptions to the general rule, including joint employment contracts can be found in Notice 700/34(HMRC website) Staff.

If the supplying party supplies services, for example construction or care services it is not a supply of staff but a supply of those services. Such services, depending on their nature, may be zero-rated or the supply may qualify for exemption from VAT. See Notice 701/57 (HMRC website) Health professionals and pharmaceutical products and 701/2 (HMRC website) Welfare for more information and qualifying criteria.