HMRC have expressed concern that some Managed Service Company (MSC) providers are giving clients incorrect advice regarding the new legislation announced in the 2007 Budget.
In response to the legislation published following the Budget, HMRC believe that a number of providers are telling their clients that they (the providers) are not MSC 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 by HMRC, it is their view that many of these organisations are MSC providers as defined in the new legislation. Whether or not the new tax rules apply will depend on the precise relationship between the MSC provider and the client company.
Advisers representing individuals operating through service companies, particularly those who believe that prior to 6 April they would have been within “IR35”, are advised to consider carefully their own, and their client company’s relationship with the MSC provider. 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.
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