Outlined below is the differing VAT treatment between the secondment of staff members from one GP practice to another and the option of staff being employed jointly by two different GP practices.
Secondment of staff
When determining whether or not a supply of staff has taken place for VAT purposes, a distinction has to be made between a supply of staff and a supply of the services that the staff are providing.
Supply of staff
A supply of staff would be made between two GP practices if the use of an individual who is employed by Practice A is provided to Practice B for a consideration [an agreement to provide a service in exchange for payment]. This applies whether the terms of the individual's employment are set out in a formal contract or letter of appointment, or are on a less formal basis.
The determining factor is that the staff are not contractually employed by Practice B but come under its direction. Where staff are supplied to Practice B but continue to operate under the direction Practice A, this is not a supply of staff, but is a supply of those services. If the supply is deemed not to be a supply of staff then the supply is subject to the VAT liability applied to the type of services being provided. The supply of staff is subject to VAT at the standard rate when made between two UK entities.
Therefore, the charge from Practice A to Practice B for a supply of an employee on secondment would be subject to UK VAT at the standard rate (currently 20%).
Value of supply
If practice A is VAT registered, VAT would have to be charged on the full amount of the payment for services provided for the supply of staff (whether full-time or part-time). As well as any fee, this would include recovery of staff costs from Practice B (e.g. salary, NICs and pension contributions).
VAT is due on the full consideration, including payments by Practice B direct to the staff member (e.g. NICs, PAYE and similar items). If practice A is not VAT registered then it must do so when the value of its taxable supplies exceeds the VAT registration threshold (currently £79,000 in any 12 month period).
Therefore Practice A must charge VAT on the whole amount being paid by Practice B for the supply of the employee.
Joint employment of staff
In case of Practice A and Practice B entering into a joint employment contract with an employee there is no supply of staff for VAT purposes between the Practices.
In order for staff members to be considered to be jointly employed their contracts of employment or letters of appointment must make it clear that they have more than one employer. The contract must specify who the employers are (e.g. 'Practice A and Practice B must both be named as joint employers).
When one practice acts as paymaster and pays the staff members salary, NIC and pension contributions etc, the reimbursement of its share of those costs by the other practice is treated as a disbursement for VAT purposes and is not subject to VAT.
Employees would not be considered to be jointly employed if their contract was with either Practice A or Practice B, even if their contract specifies that they will be required to carry out duties for the other practice. In that case there would be a supply of staff between one practice and the other and the treatment mentioned above would apply. Where a joint contract of employment is entered into with Practice A and Practice B jointly employing the staff member there is no supply for VAT purposes. Reimbursement of costs between Practice A and Practice B is not subject to VAT.
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