January 6 2008 was the date when third parties became potentially liable for huge tax bills if they force their contractors into using non-compliant umbrella bodies.

This stems from the Managed Service Company legislation included in the 2007 Finance Act.

This week, the REC has warned recruiters and other third parties (such as the end-users of contractors) to get their house in order if they want to avoid unwanted tax bills.

Commenting on this development, Anne Fairweather, the REC's Head of Public Policy, said: "The first thing all recruiters and users of contractors should remember is if they offer no advice to contractors about which umbrella companies they use - they cannot be caught by these rules."

"However many contractors look to recruitment agencies for advice about umbrella schemes. Some agencies may therefore choose to guide contractors with a list of preferred suppliers. In these circumstances agencies should carry out due diligence to insure that schemes that they are recommending are compliant with MSC legislation."

HMRC will be publishing guidance on the issue of debt transfer shortly, including a check list of things to look out for when considering recommending certain umbrella schemes. This will appear here.