Joint Employment: FAQ for Managing Agents
As the cost of running residential buildings continues to rise, some staffing providers are promoting “joint employment” arrangements as a way to avoid VAT on on-site staff. While this may sound like a welcome saving, the reality is far more complex — and potentially risky. HMRC scrutiny, tribunal criticism and employment law concerns all cast serious doubt on these schemes. This FAQ has been created to help property managers, RMCs, RTM companies and freeholders understand the implications, assess the risks, and make informed decisions. If you’re being offered a “VAT-free” staffing model, read this first.
1. What is a joint employment arrangement?
A joint employment arrangement is when two parties — typically a staffing provider and a property-related entity (such as a managing agent, Resident Management Company (RMC), Right to Manage (RTM) company, or the freeholder) — are named as co-employers of on-site staff. These might include concierges, cleaners, security officers, or caretakers.
The appeal is financial: if a joint employment arrangement is deemed genuine, no VAT is due between the parties, under HMRC VAT Notice 700/34.
2. Why are joint employment schemes being promoted?
Some personnel providers are marketing joint employment as a VAT-saving tactic. By naming the client (e.g. an RMC or managing agent) as a joint employer, they argue that VAT is no longer applicable to staffing costs, because HMRC guidance states that no VAT is due between joint employers.
3. So, is joint employment a legitimate way to avoid VAT?
Only if it’s genuinely structured and implemented. HMRC expects both parties to:
- Share legal responsibility as employers
- Jointly make decisions about hiring, training, pay, and discipline
- Manage payroll, holiday, sick leave, and performance
- Supervise staff on a day-to-day basis.
In practice, most RMCs and RTMs lack the resources or desire to do this — making these arrangements superficial and potentially challengeable.
4. Who are the typical parties involved in joint employment arrangements?
Usually:
- A staffing provider or personnel agency (VAT-registered), and
- Either a managing agent, RMC, RTM company, or in some cases the freeholder.
The staffing provider handles the employment duties, while the second party is often named in the contract with little or no operational involvement – which puts the arrangement on shaky ground.
5. What are the risks if HMRC rejects the arrangement?
They are significant:
- Backdated VAT assessments (up to four years)
- Interest and financial penalties
- The cost may be passed on to leaseholders via service charges
- Reputational damage to agents, directors or board members
- Increased regulatory scrutiny in future audits.
6. Are RMCs and RTM companies obliged to charge VAT on staff costs?
Generally, no. Most RMCs and RTM companies are not VAT registered because:
- They are not-for-profit
- They only recover service charge costs
Therefore, if an RMC or RTM genuinely employs on-site staff, no VAT needs to be charged — and this is perfectly lawful.
However, naming an RMC or RTM in a joint employment contract without real shared control can be seen as a VAT avoidance scheme.
7. What’s the safest and most compliant way to avoid VAT on staffing costs?
The safest structure is for the client to directly employ on-site staff. This aligns with leaseholder obligations and avoids VAT, since there’s no “supply” — just a recovery of costs under the lease.
This is fully compliant and not an avoidance strategy.
8. Can we ask HMRC in advance if a joint employment setup is acceptable?
Yes — and it’s strongly recommended. HMRC offers a non-statutory clearance process, where you can submit full details of the arrangement and request an official view.
This reduces the risk of future VAT assessments and demonstrates good-faith compliance.
9. How do joint employment schemes affect the staff themselves?
They are often the forgotten party in this arrangement. One day, an employee has a clear relationship with a known employer. The next, they’re handed a P45, a new contract, and told they now have two employers.
This can cause:
- Uncertainty over who manages them
- Confusion around payroll, holidays, or complaints
- Legal vulnerability in employment disputes
Stress and dissatisfaction if they feel used to facilitate a tax scheme.
10. What risks do joint employment arrangements pose to staff?
- Who’s the boss? Employees may not know who approves leave, conducts appraisals, or deals with absence
- Where do I complain? Grievances may fall into a grey area — neither employer may take responsibility
- Who pays what? Pension, sick pay and other entitlements could be unclear if responsibilities are not clearly assigned
- Morale issues: Employees may feel like pawns in a financial scheme that brings them no benefit.
11. Can employees be forced into joint employment?
No. Employees must consent to any change to their employment contract. Introducing a second employer without meaningful consultation could lead to:
- Breach of contract claims
- Constructive dismissal arguments
- Union or tribunal involvement, especially if clarity or job security is affected.
12. Should employees be consulted before being moved to joint employment?
Yes — absolutely. Any material change to terms and conditions must be discussed and agreed. If employers attempt to impose joint employment without consent, they risk damaging morale and breaching employment law.
13. What due diligence should a client carry out before agreeing to a joint employment model?
Before entering into a joint employment arrangement, clients should:
- Ask for full details of how employment responsibilities will be shared in practice – not just what the contract says.
- Review HMRC guidance (especially VAT Notice 700/34 and internal manual VATSCS03540).
- Consult a VAT specialist or employment lawyer, particularly if the arrangement is being promoted as a way to reduce VAT.
- Check insurance cover, including employer’s liability policies — to ensure they are not invalidated by unclear employment structures.
- Speak to staff – to make sure they understand and consent to any contractual changes.
If you’re being presented with a model that promises VAT savings but offers no explanation of the risks, walk away or seek independent advice.
14. Could a joint employment arrangement affect insurance, liability or compliance with employment law?
Yes — and it often does.
- Employer’s liability insurance may be invalidated or challenged if it’s unclear which party is the “real” employer.
- Health & safety responsibilities could be disputed between parties – with dangerous consequences in the event of an accident.
- Pension auto-enrolment, sick pay and redundancy rights must be clearly assigned – or both parties could be at risk of non-compliance.
- Tribunal cases can become more complex and costly if the employee’s employer is disputed.
Joint employment may look simple on a flowchart – but in practice, it creates grey areas across multiple legal and operational domains.
15. Have any tribunals looked at joint employment in the context of VAT and residential staff?
Yes – notably, the First-tier Tribunal (Property Chamber) examined joint employment in its 2023 decision involving Battersea Reach and St George Wharf. The case focused on whether joint employment of on-site staff (such as concierges and estate operatives) was legitimate, and whether VAT could be avoided through this structure.
The Tribunal was highly critical of the arrangements, noting:
- The primary motivation was to avoid VAT, not operational necessity
- The joint employment model introduced confusion and legal ambiguity, especially around employment rights
- The parties failed to seek HMRC clearance before implementing the model
- Any VAT savings risked being outweighed by the administrative and legal complications.
The Tribunal’s view was clear: if joint employment is used as a VAT dodge – without genuine shared responsibility or legal robustness – it is unlikely to withstand scrutiny.
16. What did the Tribunal say about the practicality and risks of joint employment?
The Tribunal highlighted several concerns:
- It is legally and operationally difficult for multiple, unrelated parties (e.g. landlords and managing agents) to be true joint employers
- The arrangement could undermine employee protections, particularly in relation to grievances, discipline, and employment disputes
- It risked being recharacterised by HMRC as a standard staffing arrangement, with VAT then being due in full
- The administrative burden could cancel out any financial benefit.
In short, the Tribunal did not say joint employment is never viable – but it made clear that schemes based solely on achieving VAT savings, without substance or legal rigour, are fraught with risk.
17. What is Cledor’s position on joint employment schemes?
We believe in compliance, clarity, and doing right by both our clients and the people we employ.
Cledor does not promote joint employment models. We apply VAT where it is legally due, and we work with clients to design staffing solutions that are robust, lawful, and transparent. If a scheme is built on tax ambiguity or HR sleight-of-hand, we won’t be part of it.
We believe that service charge transparency and employment integrity go hand in hand.
