Managed Service Companies

Firstly, to summarise, this legislation is being introduced in order to curb what the government calls, “widespread non-compliance of IR35” by Managed Service Companies (MSC).
The proposed legislation will come into force on the 6 April 2007.

MSC’s will no longer be able to pay any form of dividends (bonus or commission) or expenses to contractors using their schemes.

This means that if you are in a composite every penny paid to you will be subject to full PAYE tax and National Insurance Contributions.

The Government estimates that stopping MSC’s will save the Exchequer over £1billion in lost revenue over the next three years.

So, are you currently working through an MSC?

We define a MSC as:

A vehicle in which your affairs are under the control, ownership and management of someone else, whether it be an Umbrella, Composite or Offshore entity. In an MSC your individual effort will have little or no direct impact on the success or failure of the MSC, thereby suggesting to the Inland Revenue that you are not in business on your own account.
However, with your own Limited Company, which you control, own and manage, your success at finding and fulfilling contracts impacts directly on your Company’s success. You are therefore in business on your own account and outside the scope of the latest legislation.

If you think the proposed legislation will effect you then please contact us, there are options and important considerations to be made during the first quarter 2007.