VAT Treatment of Employment Agencies and VAT Treatment of Home Care Services

Chapter 5 of the VAT Manual has been updated to set out the VAT treatment of employment agencies (Part 05.68) and the VAT treatment of home care services (Part 05.67).

VAT Treatment of Employment Agencies

The status of agency staff who are sourced, placed or made available by employment agencies is a matter of fact determined on the basis of contracts and/or the actual working and other arrangements that may exist from time to time between the staff, the agency and the company, firm, body or other entity in which the staff work, referred to below for convenience as the "organisation".

In accordance with Section 37(1) of the VAT Consolidation Act 2010, as amended, VAT is chargeable on the full consideration which the agency becomes entitled to receive in respect of or in relation to the supply of agency staff to the organisation, including all taxes, commissions, costs and charges whatsoever but not including VAT chargeable in respect of the supply. The relevant rate of VAT is the standard rate in force at the time of the supply (currently 23%).

If an agency is acting as principal in the supply of staff to organisations, the "full consideration" which the agency becomes entitled to receive in respect of or in relation to the supply includes such monies as commissions, fees, wages, employers’ PRSI, holiday pay, sick pay, and other monies due under the Organisation of Working Time Act 1997.

On the other hand, if an agency is acting as agent in the supply of staff to organisations, the "full consideration" would normally exclude such monies as wages, employers’ PRSI, holiday pay, sick pay, and other monies due under the Organisation of Working Time Act 1997. The VAT treatment does not affect the position in relation to the operation of PAYE/PRSI.

Part 05.68 of the VAT manual sets out the treatment which applies in different situations that may arise.

VAT Treatment of Home Care Services

The status of home care workers is a matter of fact determined on the basis of contracts and/or the actual working and other arrangements that may exist between the home care provider and the recipient of the services. If a home care provider is acting as principal in the provision of services closely related to medical care covered by section 61 or 61A of the Health Act 1970, as amended, and is duly recognised by the Health Service Executive ("HSE") under section 61A of that Act, such services qualify for VAT exemption. A home care service is defined "as a service made available in a private dwelling for a person who, by reason of illness, frailty or disability, is unable to provide the service for himself or herself without assistance".

The holding of a "Certification of Notification" from the Health Service Executive (“HSE”) does not serve as evidence that an agency/body is providing home care services that qualify for exemption from VAT. In order to establish if a supply is taxable or exempt, each supply must be looked at on its own merits.

Part 05.67 of the VAT manual clarifies the VAT treatment applicable to the provision of home care services where the provider is acting as principal in relation to the supply and to distinguish such supplies from the provision of staff. It includes a number of scenarios to provide guidance on whether a supply is regarded as the exempt supply of home care services or the taxable supply of staff liable to VAT at the standard rate (currently 23%).

16 January 2015