Chancellor provides definition of a "Managed Service Company"

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Chancellor provides definition of a "Managed Service Company"

Published on Mar 22, 2007

Our good friends at ContractorCalculator have obtained the text of the law that will change the way contractors do business in this country - the law that defines Managed Service Companies (MSCs) and explains how they will be penalised under the new tax legislation.

According to the 2007 Budget measure, a company is a Managed Service Company (MSC) if:

Its business consists wholly or mainly of providing (directly or indirectly) the services of an individual to other persons
Payments are made (directly or indirectly) to the individual (or associates of the individual) of an amount equal to the greater part or all of the consideration for the provision of the services
The way in which those payments are made would result in the individual (or associates) receiving payments of an amount (net of tax and National Insurance) if every payment in respect of the services were employment income of the individual, and
A person who carries on a business of promoting or facilitating the use of companies to provide the services of individuals ("an MSC provider") is involved with the company

According to the text of the law, any worker who receives his income from a company of the type described above must consider himself an employee subject to PAYE and National Insurance deductions. The text goes on to define how the worker's tax will be calculated.