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Adecco UK (and others) v HMRC

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In Adecco UK (and others) v HMRC [2018] EWCA Civ 1794 (30 July 2018), the Court of Appeal found that Adecco was liable to VAT on the full amounts it received from clients with which it had placed its temporary staff (‘temps’).

Adecco are employment bureaux supplying clients with temps. The issue was the extent to which the fees that Adecco charges in connection with temps who are not its employees are subject to VAT.

Adecco contended that the actual work is supplied by the temps so that VAT is not due on the full amount received from clients (which in large represents payments for the temp’s services), but only on the element attributable to the introduction and ancillary services supplied by Adecco. HMRC contended that VAT is due on the whole amount as the temp’s services are supplied by Adecco. The question, as formulated by the Court of Appeal was therefore: ‘What is it that for VAT purposes, Adecco supplies to its clients?’

The UT had found that ‘Adecco made a supply of the provision of the non-employed temps to the clients in return for the total fees paid by the clients’ and the Court of Appeal agreed for the following reasons (inter alia):

  • The temps did not supply their services under contracts with the clients as no such contracts existed;
  • The contracts between a temp and Adecco referred to the temp’s services being supplied ‘through Adecco’;
  • Adecco conferred control of the temps to the clients; 
  • Adecco paid temps on its own behalf not as agent for the clients; and
  • Adecco did not ‘drop out of the picture’ once it had introduced a temp since it was responsible for paying the temp regardless of receiving payment from the client.

Read the decision here.

Why it matters: Following Reed Employment [2011] UKFTT 200, Adecco (which had previously accounted for VAT on the total amount received from clients), claimed partial repayment. The Court of Appeal however observed: ‘Unsurprisingly, the contractual provisions that applied as between Reed and its clients and temps were not identical to those relevant to the present case. I do not think, however, that the distinctions can justify the conclusion that the FTT arrived at in the Reed Employment case. It seems to me, with respect, that the case must be considered to have been wrongly decided.’


Issue: 1410
Categories: Cases , VAT