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Further to the Update item 'MSC standard?' (see related link above) HMRC have published more information about why they are considering an audit standard.
They say that such a standard would be published on HMRC's website and would enable a suitably qualified person, not associated with the service provider, to review a service provider's business model using the standard. This would determine whether the service provider's client companies were managed service companies or not. If such a review concluded that the companies were not MSCs, the service provider would be able to state that publicly.
They say that the intention is that the standard would provide legal certainty for employment businesses. However, officials emphasised that development proposals are at an early stage and there are a number of issues to resolve before a final decision is made.
HMRC have also provided further information for workseekers providing their services through companies. Provided that the employment business has not, since 6 April 2007, been directly or indirectly involved in the workseeker obtaining the company, then the employment business will not be liable for any PAYE or National Insurance debt under the transfer of debt provision should it subsequently transpire that the workseeker's company is a managed service company. In practice this situation is most likely to occur where a workseeker who already provides his services through a company approaches an employment business.
Where the employment business has, since 6 April 2007, been directly or indirectly involved in the workseeker obtaining the company, for example by virtue of referral of the workseeker to a service provider (a preferred supplier), then the employment business might potentially be liable for any PAYE or National Insurance debt under the transfer of debt provision.
HMRC will update current guidance shortly and aim to publish further guidance in November to help employment businesses mitigate their risk where they use preferred supplier lists.
Finally, as part of HMRC's monitoring of the effects of ITEPA 2003, Chapter 9, they will be sending letters to known service providers whom HMRC believe to be MSC providers.
The letters will ask service providers for limited information on the business models provided to clients and the numbers of clients within each business model. Provision of the information is purely voluntary but as many service providers advertise their business models, HMRC anticipate a good response. Advisers with service providers clients might want to check if they receive such letters from HMRC and consider whether it is desirable or not to reply and, if it is, how to reply.
