Some recruiters are breathing a sigh of relief after the Budget announcement on 21 March.

The main plus was Chancellor Gordon Brown's decision to delay the date from which debt liabilities can be transferred from contractors to third parties, including recruitment agencies, in certain circumstances (Recruiter, 21 March). This will now not come into force until 6 January, 2008.

The Treasury is looking to collect the tax that it believes it is due from Managed Service Companies (MSCs), notably composite companies. It is going ahead with changes it had planned to the taxation of MSCs. From 6 April, contractors working through composites will be taxed on the Pay as You Earn (PAYE) system, and have to pay National Insurance Contributions, like employees.

The Treasury said: "Where an MSC incurs a PAYE or NIC debt, and that debt cannot be recovered from the company, HM Revenue & Customs (HMRC) may transfer the debt to specified persons. This will primarily be the MSC's director and the person who provided the company to the individual (the MSC Provider)."

It added: "Subject to certain restrictions, an MSC's debt can also be transferred to persons who encourage, facilitate or are otherwise actively involved in individuals' provisions of their services through MSCs." This potentially includes recruitment agencies and had been set to take effect from 6 April. The plan was strongly opposed by recruiters.

But employment agencies that do not influence or control the finances or the way in which payments to individuals are made would not be included. In order for an agency to be included, it would have to have been actively involved in setting up the MSC.

The Recruitment and Employment Confederation (REC) welcomed the delay in transfer of tax