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Managed Service Company Guidance Note

Published on Jul 12, 2007 |

HMRC have released a guidance document on the managed service company legislation.

The legislation, which is contained within the Finance Bill 2007, aims to ensure that income received by individuals who provide services to an end user (via an MSC) will be treated as employment income.

Therefore, the MSC will have to account for Income Tax (PAYE) and National Insurance on all payments received by individuals using the Company.

For a company to be called a "Managed Service Company", a number of conditions must be met (these conditions are laid out in the guidance note).

Indicators of whether a service provider may be an MSC provider (extract from guidance note)

Questions to consider

1. Do all of the companies the service provider supports have a unique identifier? (e.g. John Smith (well known provider) Ltd, Pete Brown (well known provider) Ltd.)

2. Does the service provider determine, or seek to determine, terms and conditions relating to the client company, or individual? e.g.:

Format of contract
Payment arrangements
Payment rates
Invoicing arrangements
Terms under which the individual will work

3. Is authority for any aspect of the company's trading/provision of the individual's services, delegated to the service provider, e.g.:

Receipt, or payment, of company funds (particularly payment into a common bank account.)
Contractual arrangements

4. Does the service provider interpose themselves between the individual /company and the Recruitment Business in any other way whatsoever

5. Does the service provider interpose themselves between the individual/company and the client in any other way whatsoever

6. Does the service provider only support service company clients

7. Is the individual work seeker unable to change service provider and retain their company

If the answer to any of the above questions is "yes", particularly questions 2, 3, 4 and 5, the service provider may be an MSC provider

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Managed Service Company Guidance Note

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