Managed Service Companies - What is a Managed Service Company?

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What are “Managed Service Companies” (MSC’s) ?

Under the MSC rules, an MSC is a company run by a scheme provider selling a remuneration solution to workers/contractors. To quote the discussion document “Tackling Managed Service Companies” produced by HMRC:

“In an MSC scheme the worker obtains work engagements, usually via an agency, in the normal way. The worker supplying services usually takes no part in the on-going management or financial control of his MSC and typically not a director of the company (but rather a worker-shareholder). Instead, the MSC scheme provider handles payments between the agency and the MSC, deducting a fee for the work it carries out and arranging for the payment of the worker. The worker is often unaware of the details of the arrangement or its implications.”

The term encompasses Composite Companies as well as one man “Managed Personal Service Companies” in which, although the company concerned is for one worker only, the hallmarks of MSC’s highlighted in the quotation above are still present.

Are ordinary “Personal Service Companies” caught by the rules?

An ordinary “Personal Service Company” will not be caught by the rules because the contractor is a director of the company and retains control over its finances and the way it works.

Are Umbrella Companies caught by the rules ?

Umbrella companies will also be caught by the rules. Although the contractor is not a worker-shareholder, the rest of the hallmarks are still present. Although umbrellas do not pay dividends, they do reimburse expenses and the Treasury considers this a loss of tax revenue.

What are the rules ?

Those companies on which the rules bite (i.e. Composites, Umbrellas, and Managed Personal Service Companies, and potentially some other schemes) will be completely excluded from IR35 and all workers within them will be deemed by the MSC rules to have “employment” status. Following on from this, the rules include the following:

1. Obligation to operate PAYE

The MSC rules oblige the MSC to operate Pay As You Earn (PAYE) on the income received by workers in the MSC in relation to their services provided through an MSC. There will also be similar obligations in respect of NIC’s.

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Full index of pages:

Home Page IR35 Background - page 1 IR35 Background - page 2 IR35 Background - page 3

IR35 Rules - page 1 IR35 Rules - page 2 Beat IR35 - page 1 Beat IR35 - page 2

Beat IR35 - page 3 Beat IR35 - page 4 Ltd Company - page 1 Ltd Company - page 2

Ltd Company - page 3 Ltd Company - page 4 Umbrella Companies - page 1

Umbrella Companies - page 2 Composite Companies - page 1 Composite Companies - page 2

Composite Co - page 3 Composite Co - page 4 MSC - page 1 MSC - page 2 IR35 Insurance

IR35 Investigations - page 1 IR35 Investigations - page 2 Contracts - page 1

Contracts - page 2 Contracts - page 3 Resources 1 Resources 2 Resources 2 Sitemap