22 October 2008 | Andy Allen
Scrapping a tax break for temporary staff will cost social housing organisations an estimated £135 million, according to a purchasing group.
Procurement for Housing (PfH) and the Recruitment and Employment Confederation (REC) said the measure will also lead to major job losses.
The Treasury is planning to remove VAT concessions granted in 1998 to recruitment agencies supplying temporary housing workers employed at social landlords, charities, social care and health sector organisations.
Under the new plans social housing landlords will pay VAT on the full price of temporary workers used by their organisation, rather than just on the commission charged by the agency.
More than 80 per cent of the housing organisations contacted by the PfH said they would not be able to reclaim amount paid as VAT as they are not VAT registered. The changes would cost PfH members an average £108,000 per year, the organisation added.
Anne Fairweather, head of public policy at the REC, said: "The Treasury has significantly underestimated the impact of these VAT changes."
PfH is a procurement organisation dedicated to meeting the needs of the social housing sector.