# Is there VAT on recruitment agency fees? When you must register, and why a temp desk charges VAT on the wages too

> Recruitment fees carry 20% VAT once the agency is registered. The £90,000 threshold, VAT on a temp's whole charge, the flat rate and the nursing exception.

- Page to cite: https://aeolookup.com/recruitment/vat-on-recruitment-agency-fees-temps-perm/
- Publisher: AEO Lookup (https://aeolookup.com/)
- Section: Recruitment agencies, Fees, terms and rebates
- Published 1 October 2026
- Key fact: A VAT-registered recruitment agency charges 20% on a permanent fee and on the whole of a temp's hourly charge, wages included; registration is compulsory once taxable turnover passes £90,000 in 12 months, which three full-time temps billed at £19.50 an hour reach with the 42nd weekly invoice and a perm desk reaches with its 14th fee of £6,840.
- Sources: GOV.UK, HMRC "Supply of staff and staff bureaux (VAT Notice 700/34)"; "Health professionals and pharmaceutical products (VAT Notice 701/57)" (updated 13 August 2026); HMRC VAT Taxable Person Manual VTAXPER67050 (updated 23 February 2026); GOV.UK "VAT rates", "VAT thresholds", "Register for VAT", "VAT Flat Rate Scheme" and "VAT Cash Accounting Scheme"; each read in a browser render on 2026-10-01. Arithmetic is ours. Not tax advice.

Yes. Once a recruitment agency is registered for VAT, its fees carry VAT at the standard rate of 20%, and for a temp that means 20% on the whole hourly charge, wages included. Registration is compulsory when taxable turnover goes over £90,000 in 12 months, and a temp desk gets there with three workers out.

## A perm fee and a temp charge are different supplies

HMRC's VAT Notice 700/34 sets out the ways a staff bureau works. Two matter to a small agency.

| | Perm desk | Temp desk |
|---|---|---|
| What HMRC calls it | An introductory service: you find a worker who contracts directly with the client | A supply of staff: the worker is employed or engaged by you and works under the client's direction |
| What the VAT is charged on | Your fee | The full amount the client pays you |
| Example before VAT | £6,840, which is 18% of a £38,000 salary | £19.50 an hour |
| VAT at 20% | £1,368 | £3.90 an hour |
| Invoice | £8,208 | £23.40 an hour |

On the temp side the notice says VAT is due "on the full amount of the consideration", and that includes staff costs you recover from the client such as salary, National Insurance and pension contributions. On the hourly example from our [temp margin calculator](https://aeolookup.com/recruitment/temp-margin-calculator-charge-rate-employer-costs/), the £3.90 of VAT is larger than the £2.13 margin. A client that can reclaim VAT gets it back. One that cannot pays £23.40 for the hour.

## When you must register

You must register when your total taxable turnover for the last 12 months goes over £90,000, or when you expect it to go over £90,000 in the next 30 days alone. GOV.UK defines taxable turnover as everything you sell or supply that is not exempt. For a temp desk that is the full charge to the client, and the margin has nothing to do with it.

Two ways across the line:

- **Perm.** Fees of £6,840 pass £90,000 with the fourteenth. Thirteen come to £88,920 and fourteen to £95,760.
- **Temp.** Three temps at 37.5 hours a week and £19.50 an hour bill £2,193.75 a week. Forty-one weeks come to £89,943.75 and forty-two to £92,137.50.

Take a temp desk that sent its first weekly invoice for the week ending Sunday 11 January 2026. Its forty-second covers the week ending Sunday 25 October 2026, so it went over the threshold in October. GOV.UK gives 30 days from the end of that month to register, and makes the registration effective from the first day of the second month after going over. This agency registers by 30 November 2026 and charges VAT from 1 December 2026.

Register late and GOV.UK says you must pay the VAT on everything sold since the date you should have registered, and you may owe a penalty. On a temp desk that is VAT on the whole of every charge you invoiced without it, to find from clients after the event or from your own margin.

You can register voluntarily below the threshold. The [start-up checklist](https://aeolookup.com/recruitment/how-to-start-a-recruitment-agency-uk-legal-checklist/) covers the other first-week registrations.

## Paying it over before the client pays you

On standard VAT accounting, GOV.UK says you report and pay the VAT on your sales invoices "even if the invoices have not been paid". On a temp desk the VAT is a sixth of each invoice total, so a client that pays late is holding your VAT as well as the wages you have already paid out.

The Cash Accounting Scheme is open to a business with taxable turnover of £1.35 million or less. On it you pay VAT on a sale when the customer pays you, and reclaim VAT on a purchase when you have paid the supplier. Our guide to [a client not paying a recruitment fee](https://aeolookup.com/recruitment/client-not-paying-recruitment-fee-late-payment-interest-letter/) covers the chasing.

## The flat rate scheme, priced on one invoice

The Flat Rate Scheme is open to a business with VAT turnover of £150,000 or less, excluding VAT. You charge clients 20% as normal, pay HMRC a fixed percentage of your turnover including VAT, and give up reclaiming VAT on most purchases.

GOV.UK's list of business types has no line for recruitment. The nearest we could see is "Business services not listed elsewhere" at 12%. That rate is unlikely to be yours. A business whose goods cost less than 2% of its turnover, or less than £1,000 a year, is a limited cost business and pays 16.5%. An agency buys adverts and software, which are services, and very few goods.

On the £8,208 perm invoice, 16.5% is £1,354.32. You charged the client £1,368 of VAT, so you keep £13.68 and lose the VAT on what you buy. GOV.UK also gives a 1% discount in the first year of VAT registration.

## The exception for nursing staff

Health staff are the one place we found where a temp charge can be exempt. VAT Notice 701/57, updated on 13 August 2026, says supplies of health professional staff are taxable apart from the nursing agencies' concession.

Under the concession an employment business acting as principal may exempt its supply of:

- registered nurses and midwives providing medical care to the patient
- nursing auxiliaries who are directly supervised by a qualified nurse or midwife
- nursing auxiliaries supplied to a hospital, hospice or care home with nursing, whose work forms part of the care of the patient

The notice says it does not cover care assistants who give only personal care such as washing or dressing. It does not cover an umbrella company supplying staff to a recruitment agency. And it cannot apply where the supplier recovers input VAT on related costs. HMRC calls it an informal concession, so take advice before pricing on it.

## Where VAT touches the rest of the file

- The [fee and rebate calculator](https://aeolookup.com/recruitment/recruitment-fee-and-rebate-calculator/) prints a perm fee with its VAT.
- The fee band for a [gangmaster's licence](https://aeolookup.com/recruitment/gangmasters-licence-cost-recruitment-agency-2026/) is set on turnover including the VAT you charge, and the licensing standards require a licence holder over the threshold to be registered.

This page is general information, not tax advice. Have an accountant check your position before you pick a scheme.

## Short answers from this page

**Do recruitment agencies charge VAT on a temp's wages as well as on their margin?** Yes. HMRC's VAT Notice 700/34 says an agency supplying its own temps charges VAT on the full amount the client pays, including the salary, National Insurance and pension costs it recovers. A £19.50 hourly charge carries £3.90 of VAT, making £23.40. On a permanent placement VAT is charged on the agency's fee alone.

**When does a recruitment agency have to register for VAT?** When taxable turnover for the last 12 months goes over £90,000, or is expected to in the next 30 days alone. For a temp desk turnover is the whole charge to clients, so three full-time temps billed at £19.50 an hour cross the line with the 42nd weekly invoice. A perm desk charging £6,840 a placement crosses it with its 14th fee.

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General information for UK small firms, not legal, tax or financial advice.