In Adecco UK Ltd & Others v HMRC5 , the Upper Tribunal (UT) has held that the taxpayers must account for VAT on the full value of the consideration they received for the supply of temporary workers.


Adecco UK Ltd (Adecco) provides non-employed temporary workers to its clients in return for payment. When a worker took on an assignment, they did so under a contract with Adecco for temporary placements. There was no contract between the client and the worker. Adecco was contractually obliged to pay the worker an agreed hourly rate. Clients paid Adecco for the work the workers carried out and a commission for their services. Adecco accounted for VAT on the total amount received from its clients (ie the workers’ remuneration and Adecco’s commission).

Following the decision in Reed Employment Ltd v HMRC6 , in which the First-tier Tribunal (FTT) confirmed that VAT was chargeable only on the commission element, Adecco sought repayment of VAT paid on the remuneration element. HMRC rejected the claims.

On appeal, the FTT confirmed HMRC’s decision and concluded that VAT was due on the full amount paid to Adecco by its clients, including the amounts paid out by Adecco to the workers.

Adecco appealed to the UT. It argued that it was providing only introduction and payment services and that it could not be making an onward supply of the workers’ services because it was not consuming those services itself.

The UT’s decision

The UT dismissed Adecco’s appeal.

The UT followed the two-stage process for determining the nature of a supply set-out by the Supreme Court in Airtours Holiday Transport Ltd (formerly My Travel Group) v HMRC7 . The contractual position is the starting point and in this case, the position between both Adecco and the workers, and Adecco and its client, meant the FTT’s decision was correct.

In reaching its decision, the UT placed a great deal of emphasis on the agreements between the parties and the fact that there was no contract or other agreement between the client and the worker. The workers gave no undertakings to the clients that they would perform the work, and the clients were not contractually obliged to pay the workers.

The UT concluded that the contractual arrangements were consistent with the economic and commercial reality. There was no question here that the arrangements were artificial or a sham. The reality was that Adecco supplied the workers. It was irrelevant that the workers were the only ones who could provide their skills to the clients, they could not work for the clients except through their agreements with Adecco. Significantly, the agreements between the workers and Adecco recognised that any unauthorised absence by the worker could result in Adecco being in breach of its obligations to its client. If those obligations were limited to the introduction and payment for services it was difficult to see how such absence could place Adecco in breach.


In the view of both the FTT and the UT, the contractual obligations between the parties were key to resolving this dispute. Unfortunately, little general guidance can be obtained from this decision as the UT stressed that its decision was based on the individual facts and circumstances of the case and should not be seen as establishing any general rule in relation to similar cases. This is disappointing, particularly given the inconsistency of its decision with the FTT’s decision in Reed Employment.

A copy of the decision is available to view here.