Managed Service Company Legislation
Part two.
The MSC legislation was established to counteract the use of Personal Service Companies (PSC) where, in effect, the company was being run by another party rather than the contractor, whilst the contractor receives the tax benefits of being an incorporated body.
Those tax benefits derive from the contractor drawing earnings from the company below their market rate and receiving the remaining payment for services through a distribution of company profits at lower tax rates as dividends.
Despite this, the use of dividends may be seen as industry norm for contractors. Imperatively though, for a PSC to be a Managed Service Company (MSC), there must be a Managed Service Company Provider (MSCP). 61B(1)(d) ITEPA 2003 states that an MSP is;
A company which carries on the business of promoting or facilitating the use of companies to provide the services of individuals and is “involved” with the company.
As above, many contractors will see their accountants as helping them to facilitate the use of their PSC as fundamental to running their business which leads us to the crucial question and one which all taxpayers who are in receipt of this letter must address;
Part three...
COULD YOUR ACCOUNTANT BE IDENTIFIED AS A MSCP?
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.
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