VAT man shows some charity

The Charity Finance Directors Group had slammed the DTI over a proposed employment agency regulation which could have meant VAT being paid not only on the commission charged by a temping agency, but also on the wages of temporary staff.

But Customs moved to quell fears saying 'there will not be a problem' as a staff hire concession to charities will continue for a further 18 months.

Customs is expected to put this apparent 'moratorium' into writing soon.

Currently, if a temporary worker is introduced to an employer by an agency, the agency charges VAT on its commission. But under the proposed new rules, employers would pay VAT on the employee's wages as well.

The DTI originally stated that 'the impact on this (charity) sector is likely to be negligible since agency temps are rarely used by these organisations'.

This outraged members of the sector, after being alerted by VAT experts at PricewaterhouseCoopers.

Claire Million, director of finance at charity United Response, said the change in policy would cost her organisation £400,000 a year.

This week the DTI remained non-committal on whether charities would be exempt when the rules came into force. 'CFDG views will be given full consideration in our consultation,' said a departmental spokesperson.

David Sinclair, policy officer at the CFDG, said it was 'excellent news' Customs had confirmed the moratorium but said the CFDG would continue to press the DTI on the issue.