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MSC providers
HMRC are beginning to take a more active view of media reports, commenting on what is happening, rather than sitting back and saying nothing. This is good in that taxpayers might have a little more insight into what HMRC are thinking, but bad in that HMRC's view will not necessarily be correct in a particular individual's circumstances (or at all) and that individuals could worry needlessly.
A recent example of this active stance relates to managed service companies. A recent posting under 'what's new' on HMRC's website says HMRC have noticed that, in response to the legislation published at the Budget, a number of providers are telling their clients that they (the providers) are not managed service company providers, rather that they are accountants. They are therefore telling clients that their companies are not caught by the legislation.
Based on the advertising material seen, HMRC say that many of these organisations are managed service company providers as defined in the new legislation. Whether or not the new tax rules apply will depend on the precise relationship between the provider and the client company.
Individuals operating through service companies, particularly those who believe that prior to 6 April they would have been within IR35, should consider carefully their and their company's relationship with the MSC provider, say HMRC. If a service company is within the legislation and the company fails to operate PAYE, this could result in individuals being held personally liable for the PAYE debts of the company. This is a complex subject and advisers with clients connected to MSCs should ensure that everyone is clear on the tax position. See, 'Round three' by Anne Redston, Taxation, 5/12 April 2007, page 386 for a discussion of MSCs.
www.hmrc.gov.uk
