HMRC have just released a spotlight on Managed Service Companies, the guidance being that they are avoidance schemes and HMRC are all set to pursue any non-compliance.
HMRC recently won its first case under the MSC legislation in the Court of Appeal. The unanimous decision in the court also gave valuable guidance on the definition of a managed service company provider and what constitutes ‘influence’ or ‘control’. The court has agreed with HMRC that both have a much wider definition. The result of this is there will be many managed ‘personal’ service companies which HMRC will now target to recover PAYE and NICs. In addition, if HMRC can’t recover the debt from the PSC, they will pursue other relevant third parties under the transfer of debt provisions.
HMRC have stated that “…they will investigate and challenge these arrangements through every route open to it (including litigation) and seek full settlement of the tax due, plus interest and penalties where appropriate. HMRC is relentless in closing down avoidance schemes and encourages users of similar products operated to settle their outstanding tax or National Insurance contributions enquiries now.” In addition HMRC state that: “If any part of the tax and National Insurance contributions are irrecoverable, HMRC will transfer unpaid debts to others, including the service company’s directors, the MSC provider and the MSC provider’s directors and associates. All are jointly and severally liable for the debts.”
Some of the enquiries I have had recently have come in as IR35 but, I have recognised that actually it looks more like a managed service company. Please be aware of these structures and make sure that any new corporate structures take into account the MSC legislation.
If you have any queries contact (me) Rebecca Seeley Harris in the specialist Employment Status Team (TAS group) at PKF Francis Clark.
For more details on the case, please read my article in AccountingWeb: HMRC poised to collect tax from MSC providers