The Recruitment and Employment Confederation has hit back at government claims that VAT Staff Hire Concessions were an "obsolete tax avoidance scheme".

Fiona Coombe, director of professional services at the REC told Recruiter the comments made in the 2 April issue of the magazine endorsing the removal of the concessions from April 2009 were "inaccurate".

She said: "The SHC was introduced in 1997 as a temporary measure until Her Majesty's Revenue and Customs (HMRC) had completed its review of the impact of the draft Employment Agencies Act Conduct Regulations, revised by the DTI, to ensure the protection of clients and candidates against bad practice in the recruitment industry.

It was not referred to as a tax avoidance measure at the time but was introduced to create a level playing field for agencies."

Coombe explained that the DTI felt this arrangement denied vulnerable temps certain rights and effectively outlawed the practice in 2004.

However, another concession was introduced on a temporary basis pending the outcome of HMRC's review, which has taken it 27 months to complete.

A spokesman for HMRC said the "tax avoidance schemes" had could potentially cost the government at least £250m a year.