VAT and New Deal

VAT and New Deal

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A client receives monies from the Employment Service under the New Deal. This relates to weekly wage subsidies and amounts towards training. The client recruits the employee for the employer for whom he is the payment agent. The employer employs directly the New Deal entrants. The client neither remits any of the New Deal subsidy to the employee or the employer. The client is VAT registered but section 4.3 of the C&E Information Sheet 3/99 of March 1999 regarding VAT and the New Deal says that payments to employers of subsidies are outside the scope.
Do you think in the circumstances outlined that the supply is standard rated and if so are the subsidies paid to the client inclusive of any VAT?

I know this is out of the ordinary but any opinions are greatly appreciated

Steve

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By AnonymousUser
01st Jul 2002 14:55

What is the supply?
When New Deal was first introduced there were great difficulties in determining VAT liabilities. C&E published an Information Sheet, but it may be worth looking at the C&E Guidance (V1-7, Chapter 21, Section 8).

From the details you have given, I am not quite sure what your client's involvement is. Certainly, any wage subsidy paid to an employer is outside the scope of VAT, but your client is not the employer, and is not passing the subsidy on to the employer. Why is that?

If your client is actually supplying counselling or careers advice then this will be standard rated.

Could do with some further info really.

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By neileg
02nd Jul 2002 15:00

Like Alison, I'm confused
The New Deal subsidies are payable to the employer. Why would the employer agree to an agent accepting the subsidies with no benefit to the employer? The facts, as explained, just don't make sense!

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