Accountants and the new MSC legislation

[Lewis]

Sorry to drag up the same old topic once again but I just read a Shout99 article and now I need to vent my anger. www.shout99.com/contractors/showarticle.pl?id=43285

Quote from the Institute of Chartered Accountants : “The legislation is ambiguous about whether firms of chartered accountants and tax and business advisers who as part of their other services advise clients about the best structure through which to trade and provide the necessary company secretarial services to enable them to do so, are within the definition of ‘an MSC provider’.”

Another quote from the article: "The accountant’s work for other companies would taint all their clients, and in assessing whether there is a risk of falling within the scope of schedule 3, a freelancer therefore has to look not only to their own relationship with their professional advisers, but at the services that they might be offering to other people."

Arrggg .... How on earth are we supposed to know what services our advisers provide other clients? It's so mental

[chris79]

Sorry to drag up the same old topic once again but I just read a Shout99 article and now I need to vent my anger. www.shout99.com/contractors/showarticle.pl?id=43285

Quote from the Institute of Chartered Accountants : “The legislation is ambiguous about whether firms of chartered accountants and tax and business advisers who as part of their other services advise clients about the best structure through which to trade and provide the necessary company secretarial services to enable them to do so, are within the definition of ‘an MSC provider’.”

Another quote from the article: "The accountant’s work for other companies would taint all their clients, and in assessing whether there is a risk of falling within the scope of schedule 3, a freelancer therefore has to look not only to their own relationship with their professional advisers, but at the services that they might be offering to other people."

Arrggg .... How on earth are we supposed to know what services our advisers provide other clients? It's so mental

It's a total joke and whoever implemented this legislation should not be in the public office getting paid by our taxes.

[malvolio]

There are four specific test and a pile of sub-clauses that have to be met if a company is to be classed as an MSC. Accountancy firms of any kind will not meet all four. Hence accountancy firms are not MSCs. Apart from which they have a specific exclusion from the scope of the new rules.

Quick sanity test - who signs the cheques and who decides (not calculates, decides) what amount they should be for?

[Lewis]

There are four specific test and a pile of sub-clauses that have to be met if a company is to be classed as an MSC. Accountancy firms of any kind will not meet all four. Hence accountancy firms are not MSCs. Apart from which they have a specific exclusion from the scope of the new rules.

Quick sanity test - who signs the cheques and who decides (not calculates, decides) what amount they should be for?

I thought they were OR clauses not ANDs for the MSC Providers. But even so by far the most positive thing I have read since the new legislation is Simons post http://forums.contractoruk.com/thread17042.html where HMRC seem to be clearly saying don't worry about accountants. That was good to read.

[Bradley]

Mistaken

There are four specific test and a pile of sub-clauses that have to be met if a company is to be classed as an MSC. Accountancy firms of any kind will not meet all four. Hence accountancy firms are not MSCs. Apart from which they have a specific exclusion from the scope of the new rules.

Quick sanity test - who signs the cheques and who decides (not calculates, decides) what amount they should be for?

The draft legislation on the Lawspeed website says that a company is an MSC if a MSC provider is associated with it. I don't think that there was any suggestion that accountancy firms were going to be MSCs and as such the MSC tests you talk about do not apply to them. What is important is that your accountant does not promote or facilitate the running of PSCs. Accountancy firms who have a large number of contractor clients will always run the risk of being deemed a "MSC Provider" by HMRC.

[simondolan]

Accountancy firms who have a large number of contractor clients will always run the risk of being deemed a "MSC Provider" by HMRC.

Not true.

Direct from the Treasury:

"An accountant running an accountancy practice, providing services recognised by the accountancy regulatory bodies, would not fulfil the dual criteria in section 61B(1)(d) and is therefore outside the legislation, even where a sizeable proportion of the client base are service companies."

[malvolio]

Find a definition of a PSC outside Gay Gordon's febrile imagination and you may have a point. You won't and you haven't.

The term "PSC" is a political soundbite, not a legal identity. MyCo is every bit as legal an institution as Tesco.

[malvolio]

I understand the point but do not agree with it. You cannot classify CompanyA as an MSC because the bulk of their clients are small companies typically serving a defined market, and nor can HMRC who still have to pay some lip service to the law.

Equally you cannot easily define MyCo as a Service Company - which again has no legal definiton - and then argue that my suppliers are MSCs and therefore my taxation position is changed as a result.

Certainly you cannot change SJD from being an accountancy firm to being an MSC purely because a real-but-defunct MSC has decided to call itself an Accountancy firm so as to try and retain the client list it has just lost, which is the position you are actually trying to support.

Personally, I'm not losing sleep over it, and nor should anyone else - well, apart from Giant of course...

[simondolan]

You've missed my point entirely.

I know full well there is no such thing legal definition of a PSC - however the Treasury statement doesn't use the term PSC they use the term 'service company' only which could mean something else entirely (in their own mind).

Yet, SD has assumed that the Treasury's interpretation of SC's is the same as PSC's. Is it?

In law this may be irrelevant, but the IR are the ones calling the tune as to who falls under this spotlight and do contractors need the hassle of being witht he wrong kind of accountant who may tar everyone to the same brush and start sending out PAYE demands on all income - irrespective of whether they fall outside iR35 or not?

Clear now?

The quote from the Treasury is exactly that - a quote. It is not legislation, hence the "service company" and not "personal service company". Even if you wanted to argue there was a distinction (which there isn't), a "service company" would be one providing services and therefore applies equally to one man companies.

All the major accountancy bodies are liaising with the Treasury to help define this so "proper" accountants will not be caught. I have spoken with the Treasury and believe me, their intention and want is to crack down on MSC's - they will not target normal accountancy firms.

[Lewis]

I have spoken with the Treasury and believe me, their intention and want is to crack down on MSC's - they will not target normal accountancy firms.

I don't know the answer to this, but are there actually any MSC providers still running as if nothing has happened? Surely nobody would be so foolish. Which begs the question are there any MSCs left to crack down on?!

What has happened to the revenue's targets ... 1000s of contractors previously in MSCs are now running their own Ltds, Carter Allan has an 800% increase in business bank account applications, accountants are scooping up all the ex-Giant and co. business. Ultimately the majority of ex-MSCs if not now will eventually be Ltds in my opinion. They might go umbrella for a while.

So what have HMRC gained apart from making our lives harder? They haven't got the taxes they want so they are still going to come after us ....

Can individual accoutants ask HMRC for written confirmation they are not affected by new legislation? (I doubt it).