PCG submits formal response to Managed Service Company Proposals

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PCG submits formal response to Managed Service Company Proposals

Published on Feb 28, 2007

The Professional Contractors Group has submitted its formal response to the Government’s proposed measures to tackle Managed Service Companies (MSCs).

The Group says that important changes are needed before it will be successful, but that the basic measure is potentially sound.

PCG Chairman David Ramsden commented: “We are making three key recommendations to the Government:

the introduction of the measure must be postponed by six months
the debt transfer proposals must be amended so that workers cannot be pursued by HM Revenue and Customs for debts left by a MSC
the new questions proposed for the P35 and self-assessment tax return must be dropped.

“With these changes, we believe the measure will be workable; without them, it won’t."

“We must also express our disappointment that the Government has sought to justify this measure with reference to disguised employment, which is totally irrelevant: this is a tax measure and will not extend employment rights to anybody.”

On the question of whether PAYE Umbrella companies and their expenses policy will be affected by the measure, PCG has announced that it is satisfied that they will not. The definition of a MSC and the reference to “employment income” in the legislation take Umbrellas outside the scope of the changes.

PCG has also used its response as an opportunity to put forward a positive vision of future reforms of employment status. “The hopeless confusion around employment status in the UK is the root cause of tax measures such as this and IR35,” continued Ramsden: “by tackling this and clarifying employment law so that disguised employment is no longer possible, the Government will be able to introduce the simplification that the tax system so desperately needs”.