VAT on wages
What would be the VAT position of the following scenario:
A construction company (company A) makes payments to company B (recruitment agency) for subcontractors & PAYE workers' wages. If for example, a temp works for company A for 20hrs and is paid £8 per hour, company A transfers £160 to company B.
Company B pays the same amount to the subcontract less 20% CIS tax which it would obviously remit to the tax authorities. company B does not make any margin from the payment of wages, but it gets an opportunity to make a deduction from the subcontractor's net pay for some training it offers to the subcontractor.
Question: Is company A supposed to add VAT to the £160 it transfers to company B? Also, is company A obliged to raise an invoice to company B?
NB: Company A and B are not related in terms of ownership/control.
I would be grateful if you could offer some assistance on this one.
Regards
Ellyxris
VAT should be charged
I would have though that VAT should be charged - the VAT situation changed on 1 Apr 2009
http://www.hmrc.gov.uk/budget2008/tn-withdrawal-staff-hire.htm
It is not whether VAT should be added by A, but whether B should have charged VAT. Assuming B is VAT registered, it is up to them to properly account for it.
Whatever the VAT position, A should get an invoice from B - they need some paperwork to justify the payments that they are making.