Read the latest on VAT implications for housing associations.

Adecco – overpaid VAT on temporary staff costs

The decision in ‘Reed Employment’ suggested that VAT should be chargeable on the commission element only of supplies of temporary staff, and not the salary element.  

HMRC have sought to limit the scope of this decision, and so Deloitte have been assisting Adecco with their case. This case was heard in the First-tier Tribunal with the decision being released in November 2015. The judge found against the taxpayer, upholding HMRC’s contention that VAT should be accounted for on both the wages and the agency’s commission relating to the provision by Adecco of non-employed temporary workers to third party clients.

Adecco’s appeal was heard by the Upper Tribunal in December 2016 and we expect a decision will be released sometime in Spring 2017.

Housing associations that have paid VAT to suppliers in respect of temporary staff have an opportunity to submit claims for overpaid VAT on the salary element to suppliers. Please contact Deloitte for further information.

Reduced rate of VAT for the installation of energy saving materials

The CJEU published its judgment on 4 June 2015 in the infringement case brought by the European Commission over the UK's application of the reduced rate of VAT to the installation of energy saving materials in dwellings.

Following receipt of the Commission's original complaint about the UK relief, the court found that the UK had applied the reduced rate too widely and so the UK law was changed to exclude 'charitable use' buildings from its scope. This judgment suggests that even if the relief is not withdrawn in its entirety, the domestic law will need to be extensively revised to make it comply with the interpretation of EU law given in the CJEU judgment. 

VAT cost sharing exemption

The First-tier Tribunal released its decision in the case, West of Scotland Colleges Partnership, which supported HMRC’s strict approach to the application of the exemption. 

Taxpayers wishing to rely on the cost sharing exemption will have to carefully review the audit trail they have in respect of costs being reimbursed by the members of the Cost Sharing Group, ensure it supports the claim and be clear that the evidence and documents adduced adequately supports the proposed position.

Printer matter – zero rating

HMRC released Business Brief 10/2015 in relation to printed matter and direct marketing, setting out their view that the supply of direct mailing, door drops and insertion is a single standard-rated supply of services.

From 1 August 2015, direct marketing providers can only zero-rate services where the printed matter is delivered to their customer or their customer’s appointed mail operator. This could result in higher VAT costs for housing association and it is recommended that housing associations review their arrangements and are clear on the real cost.