Recruitment agencies are insisting that they should not be liable for outstanding tax owed to HM Revenue & Customs (HMRC) by contractors.

The Association of Technology Staffing Companies (Atsco) is planning to submit proposals to the chancellor in an attempt to make recruitment companies exempt from any outstanding tax. The Treasury recently outlined plans for agencies to become liable as a third party from April 6th, even though they are not responsible for the managed service schemes that many contractors sign up to.

Ann Swain, Atsco chief executive, told Contractor UK that the incoming laws were "grossly unfair", potentially costing the recruitment industry millions of pounds.

"If recruitment companies are not running these schemes and contractors are joining them freely, why should recruitment companies be liable if contractors are not paying the right amount of tax?" she demanded.

"It seems completely contrary to all common principles of justice to make companies that have no legal control over individuals liable for their tax."

Atsco's proposals include drawing up a list of recruitment firms which have carried out reasonable checks and therefore should not be held liable for unpaid taxes owed by contractors.

In addition, Atsco is concerned that many contractors will seek to increase their pay demands in order to compensate for their reduction in take-home pay, which could in turn cause problems for budget-strapped public sector projects.

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