Payroll services are standard rated

Revenue and Customs Brief 16/2020 clarifies HMRC’s position on the VAT liability of payroll services after the Cheshire Centre for Independent Living conceded its appeal in the Upper Tribunal.

The case concerned the treatment of payroll services provided to disabled persons to enable them to employ a personal assistant to help them to live in their own homes. In particular whether this was a service directly connected with the provision of care and therefore exempt.

The First-tier Tribunal had allowed the taxpayer’s appeal but HMRC considered the decision was incorrect because it had not taken ‘full account’ of the tests in Diagnostiko and Therapeftiko Kentro Athinon-Ygeia AE (C-394/04 and C-395/04). It appealed to the Upper Tribunal putting forward new grounds under which the payroll services payroll services could be exempt from VAT only if they were ancillary to a primary service that was exempt. The personal...