VAT: Adecco - Upper Tribunal decision | KPMG Global
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VAT: Adecco - Upper Tribunal decision

VAT: Adecco - Upper Tribunal decision

The UT has found that Adecco must account for VAT on the full value of the consideration it receives.


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This case concerns how much VAT Adecco has to account for when it provides ‘non-employed’ temporary workers to clients. The earlier First-tier Tribunal (FTT) concluded that VAT was due on the full amount paid to Adecco by the clients, including the amounts paid out by Adecco to the workers. Adecco appealed, arguing that the non-employed temps did not supply their services to Adecco but to the client. Adecco introduced the temps to the client and pays them, but only the amount it retained was the consideration for that introductory/payment service. HMRC said the temps supplied Adecco and Adecco supplied the client. The Upper Tribunal (UT) has agreed with HMRC that the value of Adecco’s supply was the full amount paid to Adecco by the client.

In finding for HMRC, the UT has placed a lot of emphasis on the agreements between the parties and the fact that there is no contract or other agreement between the temp and client. Based on Airtours principles the UT said that the starting point was to consider the contractual position and then whether the contractual position reflected economic reality. If the person who pays is not contractually entitled to receive anything then there is no supply to the payer unless the contracts do not reflect reality. 

There was a legal relationship with reciprocity between the temp and Adecco. The temp agreed to perform the assignment for the client and Adecco agreed to pay them an agreed rate. The client is not obliged to pay the temp, but Adecco is obliged to pay the temp, for the work done for the client, whether or not the client has paid Adecco. The temp could not work for the client except through the agreement with Adecco. There was no legal relationship between client and temp.

There was a legal relationship between Adecco and the client. Any unauthorised absence of the temp could be seen as a breach of Adecco’s contract with the client. That was supportive of the supply to the client being by Adecco and not the worker. If Adecco’s obligation and the service it was paid for were merely to introduce the temp and pay the temp, the temp’s unauthorised absence would not be a breach of Adecco’s contract. The UT decided Adecco is providing the temp (not, as the FTT concluded, the work carried out by the temp) to the client. That is what the client is paying for. The value of that supply is the full amount paid to Adecco. This analysis puts the non-employed and employed temps in the same VAT position. Since the client cannot distinguish between the two economically speaking, the UT considered that this same treatment would seem to be correct. Adecco’s appeal was dismissed.

The UT decision finishes with the comment that the VAT liability of other employment businesses will require a thorough analysis of the contracts and an assessment of economic reality. This decision can only provide high level guidance, and not the general clarification the FTT had hoped the UT could provide, given the inconsistency of the FTT Adecco decision (PDF 102 KB) and Reed.


For further information please contact :


Karen Killington 

Steve Powell

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