In Adecco UK Limited & Others v HMRC [2017] UKUT 0113 the Upper Tribunal (UT) found that an employment agency, attempting to rely on the Reed decision, was making a supply of self-employed temporary workers for VAT purposes.

  • The taxpayers were employment agencies providing temporary staff to clients, including workers who, were not considered not to be employees (‘non-employed temps’) of the clients.
  • The agencies charged their clients a fee consisting of the non-employed temps’ remuneration and a commission, applying VAT to the full amount.
  • Following the tribunal decision in Reed Employment v Commissioners LON/2004/0130 the agencies tried to reclaim the VAT on the non-employed temps’ remuneration element of their fees on the grounds that the only supply they made was introductory services, and therefore only the commission should be subject to VAT.
  • HMRC refused the repayment claims on the grounds the agencies did not merely introduce non-employed temps to clients, but also supplied their services.

The FTT agreed with HMRC, finding that the agencies supplied the non-employed temps to their clients and were therefore liable to account for VAT on the total fees charged.

The UT has now upheld this decision:

  • The contractual and practical arrangements clearly showed that the agencies supplied the non-employed temps to the clients and the non-employed temps agreed to be so supplied.
  • The fact the agencies did not themselves receive the supplies of the non-employed temps did not mean they could not make a supply of them to their clients.
  • The provision of non-employed temps should be treated the same way as employed temps (where VAT is charged on the full fee), as the economic and commercial reality was the same.


This case only concerns the VAT treatment of the supply of the non-employed temps. Under the Conduct of Employment Agencies and Employment Business Regulations 2003 agencies are classed as their employer for various regulatory matters, including PAYE / NIC, see Agency Workers.

This decision goes against that in Reed, and the position for similar arrangements remains uncertain. 

This is acknowledged by the Upper Tribunal, who note that VAT decisions are highly dependent on the facts and circumstances and said that It is for that reason that we have refrained from commenting on the FTT’s decision in Reed which was not the subject of the appeal before us.  Accordingly, we consider that our decision in this case should be read in the context of and confined to its own facts and circumstances’.

Update 13 August 2018

The case went to the Court of Appeal which dismissed Adecco's appeal.


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Case reference: Adecco UK Limited & Others v HMRC [2017] UKUT 0113


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