TC09596 - [2025] UKFTT 00895 (TC)

In Adecco, the appellant employment bureaux supplied clients with temporary staff. They used three different business models, one of which was ‘non-employed temps’. Such persons were on the books of the bureaux, but were not considered to be employed by them. The bureaux might introduce the temps to clients looking for a temporary worker to undertake an assignment. The temps were not obliged to accept any assignment offered and the bureaux were not obliged to find them an assignment. Nevertheless, the bureaux undertook to pay those temps for the work that they did for the bureaux’s clients, and was classed as their ‘employer’ for various regulatory matters, including payment of Pay-As-You-Earn (‘PAYE’) and National insurance Contributions (‘NICs’). The payment received by the bureaux from their clients was periodic and normally calculated as an amount representing the payment the bureaux made to the temp, plus an element of commission. Adecco had these three “business models:

Adecco concerned Category (2) and the temps’ relationship was with Adecco only.

A question arose as to whether the fees charged by the bureaux to their clients were subject to VAT. The bureaux argued that: (i) they did no more than introduce candidates to clients and provide ancillary (in particular, payment) services; (ii) it was the temps themselves, not the bureaux, who supplied their work to the clients; (iii) on that basis VAT was not payable on the totality of the fees but only on the element attributable to the introduction and ancillary services that they supplied themselves. HMRC denied that any such distinction fell to be made, and took the view that the bureaux were obliged to account for VAT on the totality of the fees received by them. HMRC rejected repayment claims made by the bureaux on that basis. That decision was upheld by the FtT and the UT.

The Court of Appeal examined the contracts and found that Adecco was liable, come what may. Furthermore, Adecco paid the temps and was contractually obliged to do so. The court held that both contractually, and as a matter of economic and commercial reality, the temps’ services were supplied to clients via the bureaux. The bureaux did not merely supply their clients with introductory and ancillary services. VAT was, therefore, chargeable on the totality of the fees paid to the bureaux by the clients. Furthermore, there could be no question of the temps having provided their services under contracts with their clients. Whatever the scope of the bureaux’s obligations to their clients, the temps’ services were provided to clients in pursuance of the contracts between, on the one hand, the bureaux and their clients and, on the other, the bureaux and the temps.

Although the contract between the bureaux and a temp referred to the temp undertaking an assignment for a client, and providing services to the client, it also spoke of the client requiring the temp’s services through the bureaux and of the temp being supplied through the bureaux. While temps were to be subject to the control of clients, that was something that the temps agreed with the bureaux, not the clients. The bureaux could fairly be described as conferring such control on its clients. The bureaux paid temps on their own behalf, not as agent for the clients. Moreover, the bureaux did not drop out of the picture once they had introduced a temp to a client. They were responsible for paying the temp, and had to do so regardless of whether they received payment from the client. The fact that the bureaux had no control over a temp in advance of his taking up anassignment with the client did not matter.