In Adecco UK Limited v HMRC [2018] EWCA Civ 1794, the Court of Appeal upheld earlier decisions, finding that temps were not providing services themselves, and Adecco were providing more than introductory services.

The Court of Appeal has found in favour of HMRC, upholding the earlier decision of the Upper Tribunal.

As a result, Adecco are treated as having Supplied the temporary staff to end clients, not just providing introductory services. Adecco had appealed arguing that the staff provided their services direct to the end clients, such that the salaries could not form part of Adecco’s supply for VAT purposes.

The Court of Appeal disagreed with Adecco:

  • There were no contracts between the staff and the end clients. There cannot possibly be services provided by the staff to end clients under a contract on that basis.
  • The contract between Adecco and staff referred to an assignment for a client, but also referred to the services being provided “through Adecco”.
  • It was the staff’s agreement with Adecco that ensured the temps were subject to the control of the end clients. It was not something the temps agreed with the end clients.
  • The contracts barred any third party from having rights under the contracts, such that the end clients could not enforce any control through the contracts. Adecco were the one’s forcing control through the contracts.
  • Adecco did not ‘drop out of the picture’ after introducing a temp to an end client. Adecco continued to be responsible for paying the temp, and did so regardless of whether it received payment from the end client, or in the event that the end client rejected the temp.
  • Adecco held rights of termination and suspension under the contract.
  • The temps were entitled to payment from Adecco, not the end clients.
  • Adecco did not split it’s fees to end clients into remuneration and commission. It charged a single rate per hour.
  • There was no evidence that the end clients had disciplinary procedures for the temps.

The Court of Appeal concluded that both contractually and as a matter of economic and commercial reality, the temps’ services were supplied to clients by Adecco and VAT was payable on the totality of what was paid by the end clients to Adecco.

In the case, the judge also referred to the contrasting decision of the FTT in Reed Employment. In the decision, the judge stated in no uncertain terms, that they believed the FTT made the wrong decision in Reed.


Staff and VAT

Agency workers (freeview)

No VAT refund for employment agency

VAT: tribunal queries staff hire liability (Reed Employment case)

External link: Adecco UK Limited v HMRC [2018] EWCA Civ 1794



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