The VAT Tribunal case of CGI Group (Europe) Limited v HMRC ([2010] UKFTT 396 (TC)) is a United Kingdom legal case which addressed the VAT treatment of a joint employment arrangement in the context of outsourcing services.
However, this decision shows that the arrangements may give rise to an unexpected VAT liability for joint contracts of employment.
As Cox was an insurance company it had (like many other financial institutions) a limited ability to recover input VAT incurred on fees paid for outsourcing services.
CGI believed that the money paid for the shared wages would be excluded from VAT as the employees were under a joint employment contract.
There were also a number of detailed arrangements regarding the employees under the master services agreement, including that CGI agreed not to take certain actions in relation to the transferred employees for a period of six months and to indemnify Cox in respect of all liabilities relating to them from the transfer date.