MSC legislation 2007

[NickNick]

Morning all, it's been a while.

Just had an email from QDOS regarding the MSC legislation that came in in 2007 and how HMRC are looking at backdating claims to before that.

Is there a discussion on this anywhere?

Cheers
NN

[cojak]

Morning all, it's been a while.

Just had an email from QDOS regarding the MSC legislation that came in in 2007 and how HMRC are looking at backdating claims to before that.

Is there a discussion on this anywhere?

Cheers
NN

QDOS wouldn't happen to be selling MSC legislation insurance, would they?

[NickNick]

QDOS wouldn't happen to be selling MSC legislation insurance, would they?

Nope. They specifically state that they dont.


Sent from my SM-G965F using Contractor UK Forum mobile app

[northernladuk]

I got the same and for reference this is what it says...

UPDATE: MANAGED SERVICE COMPANIES (MSC)

We are aware of some contractors receiving letters from HMRC regarding the Managed Service Company legislation. The letters come from the Revenue’s Counter Avoidance department and request various items of information, including contracts and bank statements. They also offer a meeting, and come with a warning that not providing the requested documentation could result in a penalty.

What is the MSC legislation?
The Managed Service Company legislation was introduced in 2007 to combat the practice of contractors working through a structure of which they had little or no control. Prior to 2007, some service providers offered ‘off the shelf’ limited companies with standardised models of operation, with contractors having no say over how they were run or how profits were extracted. HMRC’s view is that income derived from such a structure should be subject to full employment PAYE and national insurance, as the contractors involved are not running ‘genuine’ businesses and therefore should not receive the resulting tax advantages.

Why are these letters being sent?
The introduction of the rules caused much change in the market, with many providers immediately ceasing their MSC models. Since 2007 there has been relatively little compliance activity from HMRC, but they recently won a significant appeal at an Upper Tribunal for a case which was originally heard in 2016.

The legislation is purposefully open and subjective and there remains a risk that HMRC can challenge what appear to be bone fide accountancy services.

What are the risks?
Despite the fact that the legislation looks at the business practices of the service provider (typically an accountant) for the contractor’s limited company, it is the contractor who faces the potential liability if it is found that the MSC rules apply. If the contractor cannot pay this liability, the debt can be transferred down the contractual chain.

What should I do if I receive a letter?
Whilst it is not feasible to insure against MSC enquiries in the same way as we do with IR35, it should be noted that all Qdos policyholders are entitled to free advice from our tax consultants. As such, we would advise that you contact us as soon as possible after receiving a letter notifying you of HMRC’s intent. It is important that any correspondence with HMRC is handled carefully and we can offer advice on how to respond to the letter. We are not yet aware of the extent of HMRC’s actions in relation to MSC but will provide updates in due course.

[Lance]

Spam day at Qdos. I got it and deleted it as I’ve never been part of a tax avoidance scheme.

[eazy]

HMRC poised to collect tax from MSC providers

HMRC poised to collect tax from MSC providers
HMRC poised to collect tax from MSC providers | AccountingWEB

The managed (personal) service company legislation.

Originally, the legislation was designed to close down the composite managed service companies. Now HMRC is about to realise the full potential of the MSC rules by exercising the transfer of debt provisions which, as the name suggests, transfers the tax debt to ‘another’ if it cannot be recovered from the individual.

This use of the transfer of debt rules is only possible because HMRC has won the first case brought under the MSC legislation at the Court of Appeal Christianuyi & Others v. HMRC [2019] EWCA Civ 474
Christianuyi Ltd & Ors v Revenue And Customs [2019] EWCA Civ 474 (19 March 2019)

Earlier decisions
The upper tribunal in Christianuyi concluded that there was a perfectly straightforward, two-stage test, for determining whether a company is or is not an MSC provider:

•Does the putative MSC provider promote or facilitate the use of a company?
•If so, does the company provide the services of individuals?
The FTT case concerning Christianuyi looked at three tests of how the MSC provider would be “involved with the company”:
•benefiting financially whenever the worker actually provided their services;
•influencing or controlling how the worker received their payment; or
•influencing or controlling the worker’s company finances or other activities.

https://www.taxation.co.uk/Articles/...atus-confirmed

[Maslins]

Assuming as a contractor you, rather than your accountant:
- invoice your clients,
- chase up payments if required,
- control the company bank account/make payments,
then the MSC rules shouldn't apply.

Remember it should be your company that you control/are responsible for. If you have an accountant, they're an external advisor offering guidance, not controlling your company/doing everything for you. Submitting information to HMRC/Companies House that you've signed off is of course a normal part of an accountant's service, and wouldn't put you at risk of MSC rules.

[Fred Bloggs]

I imagine they're taking aim at the thousands of ex-composite company users that Brooksons had. Back then, Brookson used to actively take the pi55 out of HMRC. That in itself largely brought about the MSC legislation. At the time Brookson used to brag very vocally about their fighting fund and how their legal team made them pretty much untouchable. Hector has a long memory though. I wonder where the fighting fund went? Paid a lot of dividends, no doubt when Brookson became accountants rather than composite company providers. (Oh, how I remember all those contractors with Brooksons with mortgages who waited weeks and months just to be paid with their own money and how Brooksons were uncontactable. I have a long memory too).

[Fred Bloggs]

Assuming as a contractor you, rather than your accountant:
- invoice your clients,
- chase up payments if required,
- control the company bank account/make payments,
then the MSC rules shouldn't apply.

Remember it should be your company that you control/are responsible for. If you have an accountant, they're an external advisor offering guidance, not controlling your company/doing everything for you. Submitting information to HMRC/Companies House that you've signed off is of course a normal part of an accountant's service, and wouldn't put you at risk of MSC rules.

Maslins, don't overlook how many thousands of composite company users there were back then. In my own circle maybe half of all contractors used a Brookson or other similar composite company. They really were taking the pi55.

[NickNick]

Assuming as a contractor you, rather than your accountant:
- invoice your clients,
- chase up payments if required,
- control the company bank account/make payments,
then the MSC rules shouldn't apply.

Remember it should be your company that you control/are responsible for. If you have an accountant, they're an external advisor offering guidance, not controlling your company/doing everything for you. Submitting information to HMRC/Companies House that you've signed off is of course a normal part of an accountant's service, and wouldn't put you at risk of MSC rules.

I do all that now of course and have done for over a decade. But this sort of thing was pretty common back in those days. Im pretty certain I dont have records from over 10 years ago so it would be hard to prove one way or another.