24 October 2008
By Neil Merrick
Social landlords face a major increase in the cost of employing temporary workers from April because of planned tax changes.
Recruitment agencies are currently covered by a tax concession when they supply staff to housing associations, charities and organisations in health and social care.
But they warn that its removal by the Treasury could cost social landlords an extra £135m in VAT.
In a survey by Procurement for Housing, set up by local authorities and housing associations to cut costs, more than 80% of landlords said they would be unable to reclaim tax on all the interim staff they employed because they were not VAT registered.
The Treasury argued that the impact of removing the concession, introduced in 1998, would cost the affected industries a total of £125m.
But the Recruitment and Employment Confederation said the cost to social landlords alone could be £135m, and as much as £400m across all sectors.
PfH director Julie Craig said: 'This change will hit the most needy and vulnerable people as funds budgeted for frontline services will have to be redirected to fund temporary staff.'