Proposals by the Office for Tax Simplification to merge contractors' tax and National Insurance contributions could cost the UK millions in additional employment costs, according to the Association of Professional Staffing Companies (APSCo).

The proposal, which is seen as an effort to reform or abolish IR35, would make freelancing less attractive as it would remove the tax incentives of freelancing, APSCo chief executive Ann Swain said.

"IR35 needs to be reformed, but the government needs to be careful that any alternative test is a genuine simplification and does not create the same uncertainty," she commented.

Ms Swain went on to say that contractors are an "absolutely vital resource" in the IT and engineering sectors, which are two areas the government "needs to be promoting".

In a recent survey, 77 per cent of recruitment professionals said they would like APSCo and the Asset Based Finance Association to consider drawing up a code of conduct to govern recruitment sector supply chains.