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Managed Service Company Legislation

Part three.

COULD YOUR ACCOUNTANT BE IDENTIFIED AS AN MSCP?

          

In all instances, the answer to this will be fact dependant. The facts of your case may not correlate to another’s, even when using the same accountant. We have spoken to many individuals on this matter over recent weeks and very few have the same fact pattern.

Consequently, group action may not take account of the individual facts required to successfully defend your own position. Similarly, templated responses citing legislative provision may not offer the best chance of success for you. 

Instead, evidencing clearly that the fact pattern does not correspond with HMRC’s assessment of the legislation is the practical way to proceed.

Could your accountant be identified as a MSCP?
It would be sensible to explore the conditions a little further in answer to the question.

In all of the assessments we have seen from HMRC so far, they have cited Conditions A, C and D (s.61(B)(2) ITEPA 2003) as having been breached.

The assessments pre-suppose the involvement of an MSCP, which is required for these conditions to be met. There may be option to challenge this assumption, but, for now, it would be sensible to explore the conditions a little further in answer to the question.

Condition A- That the MSCP benefits financially on an ongoing basis, from the provision of services of the individual

The imperative consideration here is that the benefit must derive from the provision of services of the individual, not from the simple fact of charging fees to carry on the work of an accountant. So, upon an analysis of your fact pattern, could it be said that your accountant is benefitting from the work that you do as a contractor, or are they benefitting from the simple existence of your PSC such that they earn fees from advising it? If the latter, the situation may be more akin to a traditional accountancy service which may assist in defending the position.

Condition C- That the MSCP influences or controls the way in which payments to the individual are made

A key consideration for you to assess in your fact pattern here will be whether you decide how much your company remunerates you and how frequently you are remunerated. If not, then is the company that decides this for you exercising complete control over this? Can it be amended at your direction? Are you able to evidence instances where this has happened?

As a director of the company you have ultimate control, and legal responsibility, over the company’s remuneration policy, over the bank account, and it is for you to decide on what remuneration and dividends are voted. If the remuneration policy is dictated to you and board minutes voting dividends pre-prepared by others and presented simply for your signature, this may be considered evidence of there being an MSCP.

Condition D- That the MSCP influences or controls the company’s finances or any of its activities

Finally, and in line with the above, are the systems required to manage the company’s finances such as accounting software, bank portals etc, managed by you or the company advising you? Can your PSC operate independently without your accountant and is there evidence of this? For example, do you use independent financial software such as Xero or Free agent to manage your bookkeeping? If so, whilst the converse may not breach Condition D on its own, you may be able to evidence independence from the adviser and dissuade HMRC of the existence of an MSCP / MSC situation.

In all of the above, it should be clear that your own facts will be imperative. There may be standard systems in place, established by the accountant, but are they in-keeping with how you actually engaged with them? We have spoken with many people where this i not the case. Responding in a templated fashion or as part of a wider group, at least initially, risks oversight of key considerations which may help you in the enquiry process.

Remember, a demand from HMRC does not pre-suppose a liability or that the facts assumed by HMRC are correct. It is the beginning of an enquiry which will see the true facts unearthed and validity of the demand assessed. You must convey your own facts.

 

Part four...

WHAT DOES THIS MEAN FOR YOU

          

Webinar

          

With the continual coverage of HMRC launching investigations against contractor’s PSCs, citing breach of MSC Legislation, WTT’s Rhys Thomas & Tom Wallace discuss what an MSC is, whether or not your PSC is at risk and steps contractors can take.

 

We look forward to welcoming you to our webinar

Get in touch

          

If you have any queries or were wishing to discuss any of our services in more detail, our team of experts are always on hand to answer any questions you may have. 

For a no obligation discussion about your options, or for advice on a particular matter, contact us at:

info@wttconsulting.co.uk

or call us on: +44 (0)20 3468 0000

Find us at: www.wttgroup.co.uk