The supply of staff between one legal entity and another is a taxable supply of services upon which VAT is due in the UK at the rate of 20%.
The question of what constitutes a supply of staff is a complex one to resolve. However, the FTT ruled in Reed Employment that the first employer had to 'control' the employee and that such control had to be ceded to the second employer for there to be such a supply.
In this decision, the FTT has declined to follow that reasoning.
The contractual obligations are such that the worker supplies his services to Adecco, which in turn supplies the worker to his customer. This constitutes a supply of staff and VAT is due on the full consideration received.