Thursday, October 16, 2008

VAT Man to the rescue

I subscribe to a free daily e-newsletter from “Housing News” and today (here) I saw a headline “VAT CHANGES THREATENS HOUSING JOBS”. I quickly clicked on the story and come across this complete and utter dross of a story.

The removal of a VAT concession on the wages of temporary housing staff will cost social housing organisations £135m and lead to major job losses at a time when the sector can least afford it, the Recruitment and Employment Confederation (REC) and Procurement for Housing (PfH) have warned.

The Treasury is due to remove the tax concession granted in 1998 to recruitment agencies supplying temporary workers to the social housing, charity, social care and health sectors.

The measure, which will take effect next April, means that social landlords will pay VAT on full invoice amounts for temps, rather than just agency commission, a tax that many housing organisations can’t reclaim.

In a meeting with HMRC and the Treasury earlier this month, the REC and PfH again called on Government to reconsider removing the tax concession, explaining that the rapidly worsening economic outlook is now really starting to bite in the jobs market with temporary appointments dropping swiftly. PfH surveyed its member housing organisations to measure the impact of imposing VAT on the wages of temporary workers.

Over 80 per cent of respondents confirmed that they could not reclaim the tax on all interim staff as they are not VAT registered. Other social landlords reported that they have subsidiaries with charitable status, meaning they are zero rated for VAT purposes, so some temporary workers are tax-exempt and others are not.

The survey revealed that each housing association and ALMO estimated they would have to pay an additional £108,000 per year, a cost of more than £70m to PfH’s 650 members alone. The REC estimates that the overall cost, across all sectors, will be £400m....

Do I live in a parallel universe from REC/PfC? This long overdue measure will not “threaten” any real Housing jobs. Instead it will help stop the exploitation of agency workers in the Housing and voluntary sector. This will encourage organisations to employ permanent staff and long term temporary staff on proper terms and conditions. It should not cost a bean more; in fact it may well save money since employers will not have to pay massive agency fees.

I am absolutely amazed that I did not know that this pretty disgraceful “concession” was in force in the first place! Why on earth was it ever granted? One thing is clear is that we must all try and do whatever we can to support the phasing out of this "con" next April.

There is an important role for short term agency working due to sickness cover or special “one off” events even though I think many large organisations could run their own “in-house” temporary work banks.

Many agency workers themselves wrongly believe they are “better off” working as temps. When you sit down with them and work things out they realise that this is wrong. A tiny minority of agency staff in high demand jobs may arguably be better off but they are definitely the exception that proves the rule.

Thankfully the Government has recently agreed to partial “parity” for temps in the future. But agency workers will still (probably – the details are still to be decided) lose out with regard to pensions and sick pay.

Exploitation of agency workers, who nearly always get paid less, who have only the statutory minimum sickness, pension and holiday provision and practically no employment protection against bullying and unfair treatment is pure and simple a national disgrace. It is a stain on our society.


Robert said...

I totally agree agency working many who are immigrants have had a bad deal so far with little or no protection, but it also shows in 2008 we still have firms who will rip off people.

Anonymous said...

how come private schools and bupa are charities and are vat free

so Harrow and Eaton (Cameron & Osbourne) get services VAT free yet Peckham and Hackney schools dont

Capitalism dont you just love it

Robert said...

Thats so very true and your right.