Tax changes have sparked fears NHS trusts will be hit with significant increases in agency staff costs.

Legislation coming into force this week means VAT charges for agency workers, already paid on recruitment agencies’ commission, will also apply to workers’ salaries and employers’ national insurance contributions.

The Department of Health has calculated the changes will cost the NHS £26m a year at the current VAT rate of 15 per cent.

NHS Employers head of programmes David Grantham said: “If they’re qualified health professionals providing healthcare services, they will still be VAT exempt.”

The burden on trusts would be “significant” if agencies transfer the full 15 per cent charge to their customers, he said.

HMRC guidance states medical services are exempt from VAT if they are within the profession in which a person is registered. Their primary purpose must relate to the protection, maintenance or restoration of health.

This includes hearing tests and nursing care in patients’ own homes but not general administration or services not performed by a registered professional.

Ian McDougall, client relations director at Castlerock care services, which provides GPs, said: “It’s a big cost to absorb. Charges will go up by anything from 10 to 13 per cent.”