Following the decision in the case of Reed Employment Limited HMRC have issued a Revenue & Customs Brief (32/11) setting out their position that this First Tier Tribunal (FTT) decision is binding only on the parties and does not have wider implications.

The Tribunal held that in providing temporary staff to its clients, Reed was supplying introductory services rather than making supplies of staff. Accordingly the company was only liable to account for VAT on the commission element of its charge and not on the overall amount paid by the client which included the wages paid to the temp and associated National Insurance Contributions.

HMRC state that, as a judgment of the FTT, Reed is only binding on the parties to the appeal. The Brief advises that the decision was decided on its specific facts which involved an historic claim and concerned tax periods up to 1996.

In HMRC's view, the Reed decision differs from the earlier judgment of the tribunal in Hays Personnel Services Ltd (LON/95/2610) in which the Tribunal determined that Hays was a principal and VAT was due on the whole consideration received.

HMRC therefore do not regard Reed as having any wider impact, particularly in relation to the VAT treatment that should apply to employment bureau operating in the current market conditions and regulatory regime.

HMRC's view of the correct VAT treatment for employment bureau remains that set out in VAT Information Note 03/09. In essence a bureau acting as an agent only has to account for VAT on its commission whereas a bureau acting as a principal has to account for VAT on the full amount charged to clients including the temps’ wages and employers’ National Insurance contributions.

HMRC Brief 32/11 is reproduced on here.