SimpleReturns

Company tax returns for recruitment agencies

Reviewed by Lee Jones, Founder · Updated 16 July 2026
The short answer

Every limited company in the UK has the same yearly job: send HMRC a Company Tax Return (a form called the CT600) with a set of accounts, even in a year it made a loss. Running a recruitment or staffing agency does not change that. Your version looks like this: placement fees and temp-desk margin on the income side, and your job boards, your systems and the people who help you fill roles on the costs side. The one thing recruiters most often get in a muddle over is temp wages that run through the company, so we will take that head on.

Official source. This guide is a plain-English summary of official GOV.UK guidance, not advice. The authoritative source is Company Tax Returns on gov.uk. Always rely on that over our summary.

What counts as your company's income?

Every fee a client pays your company is company income. A permanent-placement fee when a candidate you found starts a job, a retained-search fee paid in stages, the margin you earn on a temp worker each week: all of it lands in the company's account and belongs to the company first, not to you.

The good news is that Corporation Tax is not worked out on that total. It is worked out on profit: what came in, minus what it genuinely cost you to earn it. Say the company invoiced £90,000 in fees and spent £20,000 running the desk. The tax falls on the £70,000 that is left, not the £90,000.

Two rules catch people out. The return is due even in a quiet year: if HMRC has asked your company for a return, it must go in even at a loss, with nothing to pay. And filing late now costs £200 from the very first day.

What can your company claim?

One test decides it: was the money spent purely to run the business? If yes, it usually comes off the profit before tax. A company cost has to be for the business, though: a part-personal cost is not one you put a share of through the company, because that can create an extra personal charge (a "benefit in kind") instead. Here are the costs a recruitment agency genuinely has:

  • Job boards, your candidate system and sourcing tools. The paid seats you use purely to find and place candidates: the software you track candidates and clients in (a CRM), job-board postings, a candidate database or applicant-tracking system, a recruiter LinkedIn licence, and CV or background-check tools. These are the engine of the desk, and they count.
  • Consultant and subcontract recruiters. When you pay a self-employed recruiter to help fill roles, their invoice is a cost of doing the work. One honest caveat: whether someone is genuinely self-employed, rather than really an employee, is a real question that affects your responsibilities and can look different for tax than it does on paper. If you are unsure, that judgement is worth an accountant's view.
  • Business insurance. Cover you buy purely because of the business, such as insurance in case a placement goes wrong or a client says your advice caused them a loss, passes the same purely-for-business test.
  • Your office and phone. Your office or desk space, and your business phone that you use to chase candidates and clients all day.
  • Accountant and bookkeeper fees. What you pay the person who prepares the company's accounts and keeps the books straight.

Keep a clear record of each cost, and keep anything part-personal out of the company rather than putting a share through.

The trap: is the whole temp invoice your company's income?

This is the one that ties agencies in knots. When you place a temp and pay their wages yourself, you might bill the client £25 an hour and pay the worker £18. So is the whole £25 your income, or only the £7 you keep?

Here is the plain answer. If your company invoices the client for the temp in its own name and pays the worker's wages itself, the client's whole payment is your company's income, and the wages your company pays out are a cost. Both sides go in the books. Because the wages come straight back off as a cost, Corporation Tax lands only on the bit you kept, your margin, not on the whole billing. So a week where you bill £1,000 for temps and pay £720 in wages is not taxed on £1,000: the £1,000 in and the £720 out leave £280, and only that margin feeds your profit.

Two honest flags come with this. First, paying the temps is running payroll. Collecting their Income Tax and National Insurance from their wages is a separate job called PAYE, and it is not part of your Corporation Tax return. Second, the way agencies handle temp workers can get genuinely complicated: there are special rules for agency workers, and some agencies use umbrella companies to employ the workers instead. Those set-ups change who is really the employer and how the money is treated, and they are a fiddly area. If a big share of your income runs through a temp desk, that is a good one to put in front of an accountant rather than settle from a guide.

One more thing to watch. Those temp wages still pass through your company's turnover, even though you only keep the margin. Turnover is the headline "money in" figure, and if it goes over £90,000 across any rolling 12-month period, not a calendar or accounting year, your company must register for VAT. A busy temp desk can push you over that line faster than you expect, so keep half an eye on the total.

Company money is not your money

Quick reminder, because it trips up every new agency director. Once your company is paid, that money is the company's, not yours, until you take it out properly. A salary the company pays you through payroll is a company running cost, so it comes off the profit before Corporation Tax. A dividend is different: it is paid out of profit after the company has paid its Corporation Tax, so it does not lower the company's tax bill. Any personal tax you owe on a dividend is your own, handled separately from the company's return. Keeping that line clear is the whole discipline of a limited company, and the main thing that makes it different from being a sole trader.

What does filing look like with us?

You upload your company's bank statement and answer a few plain-English questions. We sort the year's money into the right places, apply the rules above, work out the profit and the Corporation Tax, and build both filings: the tax return for HMRC and the accounts for Companies House. You see every figure before anything is sent. It is free to start, and one payment of £99 covers both filings.

Common questions

Is the whole temp invoice my company's income?

If your company invoices the client for the temp in its own name and pays the worker's wages itself, the client's whole payment is company income and the wages are a cost. Because the wages come straight off as a cost, Corporation Tax lands only on the margin you keep, not on the whole billing.

Do temp wages affect VAT?

Yes. Temp wages still pass through your company's turnover even though you only keep the margin, and if turnover goes over £90,000 across any rolling 12-month period the company must register for VAT. A busy temp desk can push you over that line faster than you expect.

Is paying my temps part of my Corporation Tax return?

No. Paying the temps is running payroll, and collecting their Income Tax and National Insurance is a separate job called PAYE. It is not part of your Corporation Tax return.

Can I claim a self-employed recruiter I bring in?

When you pay a self-employed recruiter to help fill roles, their invoice is a cost of doing the work. Whether someone is genuinely self-employed rather than really an employee is a separate question worth an accountant's view.

Want your recruitment agency's return filed for you?

You upload your company's bank statement and answer a few plain-English questions. We sort the year's money into the right places, work out the profit and the Corporation Tax, and build both filings: the tax return for HMRC and the accounts for Companies House. You see every figure before anything is sent. Free to start, and one payment of £99 covers both filings.

Start your return

And if a big share of your income runs through a temp desk, or you use an umbrella company or are unsure whether a recruiter counts as self-employed, an accountant may be the better fit for that part, and that is an honest call to make.

General guidance, not advice. This guide explains how the rules generally work for small UK limited companies. It isn't tax advice for your specific situation, if you're unsure, check with us or an accountant.