Death of Composite Co's?

[gravesendboy]

Press Release from HM Treasury

Managed Service Company Schemes

The Government is taking action to tackle Managed Service Company (MSC) schemes which are used to avoid paying employed levels of tax and NICs. Income received by workers in MSCs in relation to services provided through the MSC will be subject to employed levels of tax and NICs, with the MSC obliged to operate Pay As You Earn (PAYE) and deduct tax and Class 1 NICs on that income - and the rules for tax relief for travel expenses will be the same as for other employed workers. The Government will also address the problem of MSCs escaping payment of tax and NICs due by allowing the recovery of these debts from appropriate third parties.

This will protect the Exchequer and ensure a level playing field for compliant businesses and workers. The Intermediaries legislation will remain in place for Personal Service Companies.

The Government is consulting on the draft legislation to implement this measure. The draft legislation and questions for consultation are set out in the consultation document Tackling Managed Service Companies, published alongside the Pre-Budget Report today.

[Bradley]

Yes

[Sockpuppet]

Form your own Ltd and stop worrying about it.

[BoredBloke]

"Form your own Ltd and stop worrying about it."

Because

"The Intermediaries legislation will remain in place for Personal Service Companies"

will then apply!

[pickle]

ause

"The Intermediaries legislation will remain in place for Personal Service Companies"

will then apply!

Only if you tick the stupid box on your end of years.

[Nixon Williams]

It certainly looks gloomy for composites, it will be an inr=teresting few months ahead!

[Nixon Williams]

Thought that these FAQ's from the Revenue may help!

Managed Service Companies - FAQS

These FAQS relate to the measures set out in the consultation
document ‘Tackling Managed Service Companies’ published on 6
December 2007 and their aim is to make clear who is within the scope of
the measures.

The FAQs reflect the position outlined in the draft legislation contained
in the consultation document. The legislation finally enacted by
Parliament is expected to take effect from April 2007 and may of course
differ from the drafts published for comment.

What is a ‘Managed Service Company’ (MSC)?

An MSC is a form of intermediary company through which workers provide
their services to end clients. In the draft legislation ‘MSC’ includes both
‘composites’ and ‘managed personal service companies’. These are
discussed in detail in paragraphs 2.9 to 2.18 of the consultation document.

In essence a scheme provider promotes the use of these companies and
provides the structure to workers. The worker (although a shareholder) is
almost invariably not in business on his own account and not exercising
control over the company (he is not usually a director of the MSC). That
control lies with the scheme provider who has ongoing involvement in the
MSC, exercising financial and/or management control of the company.

Are these the same as Personal Service Companies?

No. The worker in an MSC is almost invariably not in business for himself and
does not have financial or management control of the company – unlike a
PSC where the worker is usually a director and controls the finances of
company and how it operates.

The PSC may receive advice and support from accountant or other
professional adviser, but this does not amount to ‘control’ in the way that a
scheme provider controls an MSC.

I operate through a PSC - will these new rules apply to me?

No – the new rules will apply only to those within the definition of MSCs set
out in the consultation. The Government welcomes comments on the draft
legislation and will introduce the final version in Finance Bill 07. You should
check that your company isn’t an MSC as defined in the legislation, but if you
are in business on your own account and control your company’s finances
and how the company operates, you will not be an MSC.

If you are in any doubt you should check with your accountant or the adviser
who arranged for the company to be set up.

I work through a PSC – has IR35 changed?

No. The Intermediaries legislation (IR35) will remain in place, unchanged, for
PSCs. The Government intends to remove MSCs from the scope of IR35 and is consulting on the legislation defining MSCs to ensure that it is targeted
accurately.

Any comments in the consultation have to be in by 02/03/07!

Alan

[deforce]

What's a PSC?

Since when has my limited company become a PSC?
Don't like the look of this acronym......

[DimPrawn]

Since when has my limited company become a PSC?
Don't like the look of this acronym......

Since when you, or some other idiots, voted New Labour.

[Bradley]

Tax Motivated Incorporation

In the Pre-Budget Report proper I came across this little nugget:

The Government is committed to ensuring that the small business tax system adapts to the changing business environment and that the UK is the best place in the world to start and grow a business. However, it remains concerned about the tax-motivated incorporation of the self-employed, which involves businesses taking advantage of structural differences in the tax and national insurance contributions (NICs) treatment that applies to companies. The Government will therefore continue to review how the system could be modernised, made simpler, more efficient and more competitive.

In other words, get out of the managed service companies now and then we'll get you when you form your own company.