Recruiters broadly welcomed tax cuts and tax holidays for businesses in Alistair Darling’s Pre-Budget Report yesterday.

As well as the 13-month reduction in VAT to 15% from 1 December, he announced a raft of measures to help small businesses, including  a relaxation of the timetable for payment of business taxes, more generous tax relief  on firm’s debts up to £50,000; deferred increase in small companies’ corporation tax and a £1bn lending scheme for SMEs.

The rules concerning the use of overarching contracts of employment and tax relief on travel expenses will remain unchanged but the government will ensure compliance with the current regime in the future.

Brian Keegan, managing director of accountancy contractor provider 360 Group, told Recruiter: "This proves that government has listened on this occasion and that maintaining a flexible working model is key to seeing UK plc through these challenging times."

However, there was bad news for recruiters in that the Chancellor did not reverse proposals to remove the VAT Staff Hire Concession from 1 April 2009.    

Kevin Green, chief executive of the Recruitment and Employment Confederation, told Recruiter he was “deeply disappointed” that the Chancellor has not delayed the removal of the concession. “This one single measure could help retain 150,000 temporary jobs, in the medical, financial and third sectors.

However, Green said the REC welcomes measures to assist small businesses, particularly the Treasury’s decision not to change the current regime for tax relief for travel expenses for temporary workers and to focus on tightening up compliance.  
 
Albert Ellis, chief executive of IT and executive search recruiter Harvey Nash, described the Pre-Budget Report as a “a mixed, but on the whole positive, bag for UK plc” as he praised the 2.5% reduction in VAT which will stimulate investment in capital , which IT spend is so resilient.
 
“This and the multi-billion pound pot of tax relief and credit support for smaller businesses provide a much needed fiscal injection which will kick start credit flow, reinvigorate business confidence and ultimately stabilise the economy. Larger firms, too, stand to benefit from tax breaks on foreign dividends.”  However, he warned the hike in income tax for top earners to 45% and the rise in National Insurance contributions from 2010 and 2011 will have direct impact on the UK talent pool.
 
The Professional Contractors Group (PCG) expressed its “great relief” at Darling’s decision not to introduce the planned Family Business Tax on so-called “income shifting” in 2009 but warned the government’s understanding of small business was still fundamentally flawed.

Martin Hesketh, MD of Brookson, which provides accountancy, tax advice and other support services to contractors, told Recruiter:
 
“On first impressions, this is a reasonable Pre-Budget Report for recruitment agencies and contractors alike. The industry will particularly welcome the Chancellor’s decision to leave the tax rules for Umbrella companies unchanged, and his commitment to enforce the current legislation. Compliance has certainly always been at the heart of our business and we believe that the announcement provides the industry – recruitment agencies, contractors and service providers alike – with a golden opportunity to get its ‘house in order’ to ensure that no further legislation is required in this area.