This Business Brief gives information about planned changes to the VAT treatment of home care. The Department of Trade and Industry (DTI) have announced that their proposals to clarify the contractual position of temporary workers supplied by employment bureaux, have been well supported. Concerns were however expressed that, in some circumstances, the changes would increase VAT costs for those buying care in their own homes. In this Business Brief we are announcing an Extra Statutory Concession to ensure this will not happen.


In May 1999 the DTI published a consultation document “Regulation of the Private Recruitment Industry” setting out measures to update the legislation governing the conduct of employment bureaux.

One of the main aims of the DTI proposals was to clarify the contractual position of temporary workers supplied by bureaux. In particular, except in exceptional circumstances, it is proposed that temporary workers will have to be supplied on an “employment business” basis once the changes are brought into effect. Customs consider that the changes will also mean that employment bureaux will no longer be able to act as agents, but will become principals for VAT purposes. This means that VAT will be due on the total amount of the charges made by bureaux (including agency workers, salary costs) not just their commission.

Following publication of the DTI proposals, employment bureaux and others expressed concern that these changes would increase the amount of VAT charged to people buying care in their own homes. Customs and the DTI recognised that, in certain circumstances, this would place an increased VAT burden on some of the most vulnerable people in society. Customs are therefore planning to introduce an Extra Statutory Concession (ESC) for home care services. The ESC will be introduced to coincide with the introduction of the DTI changes in the Summer.

How the ESC will work

Customs are still working on the detail of the concession, but it will allow all businesses providing home care services to exclude the salary and related costs (National Insurance Contributions, pension costs etc) of home care workers from the value of their supplies. This will allow agencies providing home care to charge VAT only on their commission.

In order to qualify for the concession, businesses will need to retain evidence that the client was in need of the services provided. We anticipate that this evidence will be a straightforward declaration signed by the client or their carer.

The concession will apply to home care services where there is a risk to the recipients’ physical or mental health or welfare because they are unable to carry out domestic or personal tasks safely or adequately, or without significant pain or discomfort. The concession will cover personal care, such as bathing, as well as practical tasks such as house cleaning.

The scope of the concession will be consistent with the existing VAT relief for home care provided by charities as set out in paragraphs 5 and 10 of VAT Information Sheet 6/99 (Charities: Liability of Routine Domestic Tasks). Copies of this VAT Information Sheet are available from your local VAT Business Advice Centre. You will find the telephone number in the telephone directory under Customs & Excise.

Customs would like to hear the views of businesses and other interested parties on the proposed concession. If you have any comments, please write, by 31 March 2000, to: Richard Bowyer, HM Customs & Excise, VAT Policy, Charities & Health Care, 4E New Kings Beam House, London SE1 9PJ. A further announcement on the detail of the concession will be made in the Summer.


With the change in the rate of import VAT on works of art, antiques and collectors’ items in July 1999, an anti-avoidance measure was introduced to prevent the artificial movement of such items by people seeking to gain a tax advantage from the reduced rate of import VAT. This means that only qualifying imported goods, which have not been exported from the UK in the previous 12 months, are eligible for the 5% effective reduced rate of import VAT.

In practice, however, works of art and similar goods are sent outside the UK for various legitimate commercial reasons, and often return within 12 months. For instance, goods may be sent for exhibition, prior to auction in the UK, or sent on a sale or return basis and returned unsold. The anti-avoidance provision was not intended to disrupt businesses engaged legitimately in such activities and, in many cases, there are specific reliefs which override the “12 month” rule.

Goods held in temporary importation (TI) arrangements

Goods which are held under a TI regime are not regarded, for VAT purposes, as having been “imported” into the UK. For VAT, goods are not treated as imported until the customs duty debt is incurred (for instance, on removal from TI to home use). Consequently, goods which are removed from TI and sent outside the EU are not considered to have been exported for VAT purposes, and therefore will not be caught by the “12 month” rule. This covers, for example, goods held under TI, intended for sale by auction in the UK, but sent to third countries for exhibition prior to auction.

Goods not held in TI arrangements

For goods sent outside the member States “on approval”, or for goods exported for sale by auction, but which fail to sell and have to be returned to the UK within 12 months, “returned goods relief” may apply. Regulation 125 of the VAT Regulations 1995 allows such goods to be relieved from VAT at importation where they remain the property of the taxable person who exported them. Provided all the conditions of the relief are satisfied such goods qualify for full relief from VAT on importation, and will not be affected by the “12 month” rule.

For goods exported from the UK for repair or restoration work and returned to the UK within 12 months, “outward processing relief” may apply. Regulation 126 of the VAT Regulations 1995 allows the original value of the goods (ie. the value at export) to be relieved from VAT at importation, where they have been sent outside the EU for process or repair and are subsequently returned without a change of ownership. Provided all the conditions of the relief are satisfied such goods will not be affected by the “12 month” rule. However, VAT at the standard rate is due on the price charged for the repair or restoration.

For goods which are exported from the EU, sold, and imported back into the UK within 12 months, there are no VAT reliefs available. Consequently they will normally attract VAT at 17.5% on importation. However, Customs have agreed that, if goods were exported from the UK prior to the introduction of the new rules on 28 July 1999, businesses should not be disadvantaged. Where businesses would not have known about the “12 month” rule at the time of exportation, then, where appropriate, goods will still qualify for import VAT at the 5% rate, following importation into the UK within the 12 month limit.


New position

Used cars bought in the UK by overseas visitors (non-EC) for personal export out of the EC may with effect from 1 April 2000 be sold to the overseas visitor VAT free (subject to the conditions of the Personal Export Scheme (PES)). The change will affect a small number of businesses selling high value second-hand cars for personal export from the European Community. Prior to this change the scheme applied only to new cars, but following representations from business that restriction has been removed.


The PES differs from the normal export rules by allowing the vehicle to be used in the European Community for a limited period before it is exported. The scheme also applies to vehicles exported by an EC resident changing their residence to a place outside the EC.

The change will be made by amendment to Regulations 132 and 133 of the VAT Regulations 1995. The expansion of the scheme will be monitored closely by Customs. The need for additional conditions on the eligibility of used cars will be reviewed in the light of experience of the new changes.

For further advice and information, traders and their advisers should contact their local VAT office, listed under Customs and Excise in the telephone directory.


Copies of this and other public notices are available from Customs and Excise Advice Centres listed under Customs and Excise in the telephone book, or from our internet site – the address is at the end of this release.

VAT Notice 700/45

A new VAT Notice 700/45, How to correct VAT errors and make adjustments or claims dated January 2000 is available from local VAT offices and Business Advice Centres. It replaces VAT Leaflet 700/45 How to correct errors you find on your VAT returns (December 1993 version). Changes from the previous edition include additional information on how to:
– correct errors in accounting for VAT;
– obtain a refund of, or credit for, overpaid VAT from us;
– complete VAT returns and register a claim if you disagree with our decisions; and
– deal with other types of adjustments or claims that aren’t errors.

The new notice also lists some common errors to be wary of when accounting for VAT.

Related reading