Today’s pre-Budget report will have major implications for recruiters.

Kevin Barrow, a partner at law firm Blake Lapthorn, told Recruiterthat given the government’s fiscal position it is inevitable that “one way or the other workplace taxes will be going up.

“This will increase the incentive to work on a self-employed basis as increasingly there will be a material difference in take-home pay, especially for highly skilled workers.

“As a result, he says limited company contracting “will become more attractive”.

Barrow told Recruiter that the reversion of the VAT rate to 17.5% in January was the pre-cursor to it going up to 18.5% or even 20% next year.

“This will place even greater pressure on staffing companies to find ways not to charge VAT to banks, and insurance companies, charities and healthcare organisations [who until the beginning of last April used to qualify for the VAT staff hire concession].

“A lot of work is being done to try to get staffing companies’ supplies exempt,” adds Barrow

Barrow says there is “some speculation” that the position of umbrella workers could be affected by the pre-Budget report. However, Barrow says that even if changes are announced, given the likely change in govenment at next year’s general election, there will be insufficient time for those changes to be implemented.

Commenting on the significance of the pre-Budget statement, Recruitment and Employment Confederation chief executive Kevin Green says:  “This is a crucial pre-Budget report for jobs. Although we are seeing some positive signs in terms of employer confidence and increased hiring activity, the labour market remains fragile. Practical measures are needed to encourage job creation and it is more important than ever that we protect the flexibility of the UK labour market.”

Martin Hesketh, managing director at contractor accountant Brookson, adds: “As far as businesses are concerned, if the Chancellor is trying to assist businesses (particularly small businesses) to become the recovery engine for getting UK plc out of recession, he should not raise capital gains tax (CGT) levels and postpone the previously communicated 1p increase in the small companies’ corporation tax rate. It is unlikely that the latter will be postponed and he may also increase CGT rates, as this will be seen as taxing the wealthy and also moving someway towards bridging the gap between capital and income tax rates.”