Chancellor Gordon Brown has shocked many businesses, including recruitment firms, by putting an end to tax relief on home computers and threatening to limit the relief on mobile phones.

The measures, announced in his Budget last month, had not been widely expected.

The current tax exemption for employer-provided computer equipment will no longer apply from tomorrow (6 April), the beginning of the tax year.

The Chancellor will also restrict the relief on mobile phones, to just one per employee.

“Any tax relief that helps start-ups is very important,” said Tom Hadley, director of external relations at the Recruitment and Employment Confederation. “Governments talk about encouraging new business, but in practice take away initiatives designed to help.”

The Budget has also flagged up the intention of HM Revenue & Customs to clamp down on composite, or “umbrella” companies, created with individual contractors as shareholders. The composite enters into a contract with the client or agency. The contractor is then paid a salary and dividends from the work carried out to avoid paying National Insurance.

The government introduced the IR35 regulations to help close this loophole, but some contractors have failed to comply.

Brookson, which provides legal, tax and other services to composite companies, said it welcomed the decision. It claims to be “one of the few managed service companies to be fully compliant since the introduction of IR35”.

The other side of the coin is that workers can be denied employment rights by being forced to work through corporate structures.

“Corporate structures are the correct option for genuine contractors but they do not work in favour of disguised employees,” said Brookson.

Ann Swain, chief executive of technology recruitment association ATSCo, said: “It's disappointing that the government has decided to resurrect the issue of disguised employment again after all the pain that IR35 has put the industry through.”