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HMRC internal manual

VAT Taxable Person Manual

Particular trades: employment bureaux including nursing agencies: accounting consequences (general)

Having determined which of the four situations applies to your bureau (VTAXPER67100 and VTAXPER67200 above), you now need to determine the accounting consequences of your decision. There are a number of consequences which apply across the board, and these are explained in a. to d. below. However, where a bureau is involved in the supply of nursing or medical staff, there are additional consequences which are very much tied in with the exemption for nursing care available under Group 7 of the exemption schedule, Schedule 9 of the VAT Act 1994. These are therefore dealt with separately at VTAXPER67500.

a. The bureau acts as principal

Here the bureau makes one supply of staff, which is normally standard-rated. The wages, income tax and national insurance contributions of the staff are part of the cost which the bureau must bear (and pass on) in making its supply, and output tax is due on the full charge made to the client. Where the client asks the bureau to act on its behalf in paying the travelling and subsistence expenses of candidates attending interview, the bureau may treat these payments as disbursements for VAT purposes. But where expenses are paid to interview candidates from within the bureau’s agreed commission, these may not be treated as disbursements.

b. The bureau acts as agent for the client

Here, output tax is only due on the commission charged to the client for the bureau’s own supply of services. Any payments made to workers by the bureau - for example where, for convenience reasons, the bureau agrees to pay the wages of the worker - are made on behalf of the client, and may therefore be treated as disbursements by the bureau.

c. The bureau acts as agent for the worker

Here, output tax is due only on the commission charged to the worker for the bureau’s own supply of services. Where the worker is not registered for VAT, the bureau must not issue tax invoices or charge VAT for the supplies made by the worker. However, some workers may be registered for VAT, and here the bureau may adopt the provisions of section 47(3) of VAT Act and issue tax invoices on their behalf. This will apply mainly to fashion models, where social legislation does not prevent the bureau charging a commission to the worker, and where earnings are more likely to be high enough to breach the VAT registration threshold.

d. The bureau acts as agent for both the employer and the worker

When this situation has occurred, we have usually found that the bureau only charges commission to the employer - the supply to the worker is made for no consideration. The accounting consequences will therefore generally be as described at b. above; although if both parties are charged commission, output tax must be declared on the two charges.