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Fair trial? VAT treatment of the supply of workers by nursing agencies

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20 July 2015

The general VAT treatment for the supply of temporary staff in the UK is that it is standard rated i.e. VAT is applied at a rate of 20%.

An informal extra statutory concession does, however, exist in the UK in respect of the supply of nurses, nursing auxiliaries and care assistants by state regulated agencies. This is known as the ‘nursing agencies’ concession. Providing certain conditions are met, the concession provides that the employment agency can treat the supply of nursing staff and auxiliaries to third parties as exempt from VAT.

A judgement in a recent European case, however, has cast some doubt as to whether this concession is in contravention of EU law. The case (‘go fair’ Zeitarbeit OHG v Finanzamt Hamburg-Altona) related to a German temporary work agency which hired out care workers (e.g. nurses and nursing assistants) to third party care organisations. The German tax authorities assessed that the supply of care workers should be standard rated rather than exempt and the taxpayer appealed with aspects of the case recently referred to the European Court of Justice.

There is an existing exemption under EU law for the supply of services closely linked to welfare and social security work. However, in this case it was ruled that the supply to be considered was not the services being provided by the workers to the end client but the services offered by the agency.

On this basis the relevant was supply was determined to be the provision of workers and did not involve nursing and caring directly. It was ruled irrelevant as to what type of service the workers were actually providing. The result of this case is that the German agency is required to apply VAT at the standard rate on its supply of care workers.

Time will tell as to whether this judgement could lead to the withdrawal of HMRC’s nursing agencies concession in the UK. If withdrawn it would lead to significant additional costs for many operators in the care sector using temporary workers as, typically, they would not be in a position to recover the VAT. For now, however, supplies of such services in the UK can continue to be treated as exempt from VAT.

Have you checked the VAT treatment that is currently being applied for supplies of nursing staff versus other care staff? We are aware of differing VAT treatments being applied for such services. Now may, therefore, be a good time to reassess your position in light of the case above and to contact us if you think you are paying more VAT than you should be.

If you would like further information on the nursing agencies concession, please do get in touch with Andy Brookes, Partner and Head of Health and Care at Hazlewoods, on 01242 246670 or andrew.brookes@hazlewoods.co.uk or Julian Millinchamp, VAT Manager on 01242 237661 or julian.millinchamp@hazlewoods.co.uk


Julian Millinchamp - Indirect Tax Director
Julian Millinchamp
Indirect Tax Director Contact details