Can I Claim Recruitment Costs as a Business Expense?
Yes - costs of recruiting staff including agency fees and advertising are deductible.
What HMRC Says
Recruitment advertising, agency fees, and related costs are allowable business expenses.
When You Can Claim
- Job advertising (Indeed, LinkedIn, etc.)
- Recruitment agency fees
- Background check costs
- Assessment centre costs
When You Cannot Claim
- N/A - most recruitment costs are allowable
Understanding Recruitment Costs Expenses
Recruitment costs are fully deductible business expenses for UK limited companies. When your company needs to hire, every cost associated with finding, assessing, and onboarding new employees can be claimed against Corporation Tax. This is one of the more generous expense categories — HMRC accepts that businesses must spend money to find and hire staff, and places few restrictions on what recruitment costs are allowable.
The main categories of deductible recruitment costs include job advertising (Indeed, LinkedIn Jobs, Reed, industry-specific job boards, newspaper adverts), recruitment agency fees (typically 10-25% of the candidate's first year salary), internal recruiter costs (salary and overheads of HR staff who handle recruitment), candidate assessment costs (psychometric testing, assessment centres, technical tests), background check fees (DBS checks, reference checking services, right-to-work verification), interview expenses (travel reimbursement for candidates, room hire), and recruitment software (applicant tracking systems like Workable or Greenhouse).
Recruitment agency fees deserve particular attention because they can be substantial. A placement fee of 15-20% on a £50,000 salary is £7,500-£10,000 per hire. These fees are fully deductible in the year they are invoiced, typically when the candidate starts or after a guarantee period. If a candidate leaves within the guarantee period and the agency provides a replacement or refund, you need to adjust the original expense accordingly.
For director-only companies looking to hire their first employee, all the preliminary costs are also deductible: setting up a job listing, paying for background checks, and even the cost of employment law advice about contracts and compliance. The fact that you have not previously had employees does not affect the deductibility.
VAT on recruitment services is reclaimable for VAT-registered companies. Recruitment agencies charge VAT at 20% on their fees. Job advertising platforms like LinkedIn and Indeed also charge VAT. Keep proper VAT invoices from all recruitment suppliers. Note that some international job platforms may bill from outside the UK, in which case the reverse charge mechanism applies.
Real-World Examples
Hiring through a recruitment agency
A tech company uses a specialist recruiter to find a senior developer. The agency fee is 20% of the £65,000 salary — £13,000 plus VAT. The full £13,000 is deductible as a staff recruitment cost, and the £2,600 VAT is reclaimable. The fee is expensed when the candidate starts employment.
Direct job advertising
A small consultancy advertises for an office manager using LinkedIn Jobs (£350 for a 30-day listing) and Indeed Sponsored (£200 for two weeks). The total £550 is deductible as advertising and recruitment expenditure. Both platforms charge VAT which is reclaimable.
Candidate assessment and background checks
A financial services company pays £85 per candidate for enhanced DBS checks and £120 for psychometric testing through a testing provider. With 8 candidates assessed, the total cost of £1,640 is fully deductible. These are standard recruitment costs.
First-time employer setup
A sole director company hires its first employee. The director pays £300 for employment contract templates from an HR consultant, £200 for a job listing, and £150 for a background check. All £650 is deductible. The cost of setting up payroll software (£12/month) is also deductible going forward.
Common Mistakes to Avoid
- Not claiming DBS checks, reference checking fees, and other assessment costs as recruitment expenses — these are just as deductible as agency fees and job adverts
- Failing to adjust for agency refunds when a candidate leaves during the guarantee period — if the agency provides a partial refund, the original expense claim must be reduced
- Overlooking the VAT on recruitment agency fees, which at 20% of fees that can run to £10,000+ represents a significant reclaimable amount for VAT-registered companies
- Treating recruitment consultant fees for director-level hires as capital expenditure — all recruitment costs are revenue expenses regardless of the seniority of the role being filled
Frequently Asked Questions
Are recruitment agency fees tax deductible?
Yes, recruitment agency fees are fully deductible as a business expense. The typical agency fee of 10-25% of the candidate's first year salary is expensed in the year the candidate starts. VAT on agency fees is also reclaimable for VAT-registered companies.
Can I claim job advertising costs through my company?
Yes, all job advertising costs are deductible. This includes LinkedIn Jobs, Indeed, Reed, specialist job boards, newspaper adverts, and social media recruitment campaigns. These are treated as advertising expenses.
Are DBS check costs a business expense?
Yes, DBS checks (basic, standard, or enhanced) paid for as part of the recruitment process are deductible business expenses. They are a necessary cost of verifying candidates before employment. The same applies to other pre-employment checks like credit checks and reference verification.
Can I claim the cost of recruitment software?
Yes, applicant tracking systems and recruitment software subscriptions (Workable, Greenhouse, BreezyHR) are deductible as software subscription expenses. These tools help manage the recruitment process and are legitimate business costs.
Is paying a candidate's travel expenses for an interview deductible?
Yes, reimbursing a candidate's travel costs for attending an interview is a deductible recruitment expense. This is a common practice for senior roles or when candidates travel a significant distance. Keep a record of the reimbursement and the business purpose.
Source: HMRC Business Income Manual BIM35000 (General business expenses) and BIM47100 (Staff costs - recruitment)
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