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Tax on temporary jobs 'should be removed'

Business leaders are calling on Alistair Darling to reinstate a tax exemption on fees for temporary staff in a bid to help get people back into work.

The North East Chamber of Commerce (NECC) said the Chancellor should reverse a decision to remove the staff hire concession - which makes agency staff wages exempt from VAT - at a time when unemployment is climbing rapidly.

Staff hire concession was scrapped at the start of this month in a move that effectively makes temporary staff 15% more expensive to hire.

NECC is lobbying the Treasury to reintroduce the concession as a key priority in the forthcoming budget amid fears that it will put yet another brake on the flagging economy.

Andrew Sugden, NECC director of policy, said: “Let’s make no bones about it, the removal of staff hire concession is a tax on jobs at a time when the burden on employers through payroll taxes must be kept to a minimum.

“This concession exempted agency fees for temporary staff employed from any VAT. While this isn’t an additional cost for firms that are over the VAT threshold, it hits their cashflow during difficult times.

“For smaller start-up firms under the VAT threshold that rely on temporary workers as they grow their businesses this automatically adds 15% to their costs.”

Mr Sugden pointed out that voluntary organisations would be worst affected.

“Charities and public bodies in the region cannot pass the VAT on so they are faced with a difficult decision now as to whether or not they can afford to take on agency workers.

“This comes at a time when the Government should be simplifying the recruitment process and supporting businesses in recruiting staff. More broadly it undermines the flexible labour market that will be crucial for the economy’s recovery and we are calling for this tax exception to be reinstated.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .