It will be "wholly exceptional" for recruitment companies to be held liable for the unpaid tax debts of contractors.

That was the assurance from Robin Wythes, of Her Majesty's Revenue & Customs (HMRC), who addressed a meeting of more than 180 recruiters and other interested parties in London this month.

The meeting focused on the changes to the tax regime for contractors working through Managed Service Companies (MSCs) set out by Chancellor Gordon Brown last month.

Wythes said recruiters would not be liable simply as a consequence of their business's involvement with an MSC. He said debts would only transfer to agencies which had actively encouraged the use of MSCs, knowing their purpose had been to avoid income tax levied on employees.

Peter Clayton, chief executive of the Association of Professional Recruitment Consultants, said that Wythes "really had been listening" to the concerns raised by recruiters throughout the day. The consultation period for the debt transfer issue ends on 30 April.

Recent guidance from HMRC has widened the definition of an MSC. It will focus on the business of the MSC provider. This may make it more difficult for those contractors who had been hoping to transfer from a composite company to a Personal Service Company (PSC), under the same provider (Recruiter, 21 March).

Adrian Marlowe, of seminar organiser LawSpeed, said there was still great uncertainty surrounding the definition. He also told recruiters not to give advice to anyone on the issue, as this might lead to liability for debts.

Giant, a provider, has issued the most stark warning to date about the effect of the new regulations. It said: "Contractors and recruitment agencies who deal with any specialist providers of services to one-man limited companies (PSCs), regardless of whether they are regulated by an accountancy body or not, will be risking financial ruin, under legislation published in the Finance Bill."

It added: "In order to fully comply with this legislation and to shield its clients from unacceptable risk, Giant Group will no longer be providing services to one-man limited companies. The unequivocal advice Giant has received is that the only operating model will be umbrella services."

Matthew Brown, managing director at Giant, went on to say: "The Treasury would have to be incredibly foolish to introduce this legislation, only to allow specialist providers of services to one man limited companies to sidestep it and carry on business as usual, simply because they have a badge which says 'professional' accountant. That is not going to happen."

Rival Brookson now describes itself as an accountancy and tax service provider.

Brookson managing director Martin Hesketh told Recruiter the firm could no longer help set up PSCs, but can work with contractors who have set them up through other firms. "We're not trying to hide anything," he said.

• More on this topic will follow in 2 May issue of Recruiter.