Companies could be charged to hire skilled workers from the European Union after Brexit, Immigration Minister Robert Goodwill has suggested.
A £1,000 immigration “skills charge” is being brought in this April for firms recruiting workers from outside the EU.
Mr Goodwill told peers a similar levy for EU workers “may be something that has been suggested to us could apply”.
One business group said the idea had “raised eyebrows” while a top European politician said it was “shocking”.
But Downing Street said Mr Goodwill’s remarks had been “misinterpreted” and such a levy was “not on the government’s agenda”.
The government says the decision to leave the EU will give the UK greater control over its borders but British firms are concerned about their capacity to fill vacancies, particularly for low-paid seasonal work, if there are limits on migration from the EU.
In the year to June 2016, a record number of EU citizens – 284,000 – came to live in Britain.
Many Conservative MPs want a level playing field for EU and non-EU workers, believing Brexit is an opportunity to end the preferential treatment EU workers currently receives in the immigration system.
But former business minister Anna Soubry – who backs the UK staying in the EU’s single market – said a levy would be a “tax on successful businesses”.
“Discouraging EU nationals from coming to Britain would harm our economy, deterring investment and hitting our public finances,” she said.
Former Belgian Prime Minister Guy Verhofstadt, who is leading the European Parliament’s Brexit team and is a strong supporter of the continued right to free movement across Europe, tweeted: “Imagine, just for a moment, what the UK headlines would be, if the EU proposed this for UK nationals? Shocking.”
The Federation of Small Businesses said it had been assured by the Home Office that Mr Goodwill was only referring to the imminent levy on non-EU workers.
A spokesman added: “The priority for small businesses is to make sure that current EU nationals in the UK workforce are given the right to remain.”