Are you likely to be affected by the MSC rules?

Author: Nigel Simmons FCCA
April 11, 2022

The industry has changed dramatically for contractors over the past few years, particularly since the revision of the IR35 legislation in April 2021.

But we’re here to help. We’ve worked with contractors within the technology, e-commerce, engineering, creative and professional services industries for 13 years, providing them with a comprehensive range of advisory services. 

Most recently Managed Service Companies (MSCs) are coming under the spotlight of HMRC.

At Acconomy we have abroad range of clients with only a minority of contractors. Your affairs will be looked after directly by a qualified accountant on hand to advise on all aspects of your business. We have detailed knowledge of the IR35 and employment status legislation to ensure that you operate as tax efficiently but comply with the rules. Acconomy has no axe to grind regarding agencies or other introductions - we are entirely independent.

Our biggest thrill comes from helping contractors evolve from selling their time to building a business that has intrinsic worth in itS chosen sector. We’re proud of our achievements - have a look at our case studies

WHAT ARE THE FOUR CONDITIONS OF AN MSC?

For a company to be an MSC it must meet all of the following conditions:

1.    Its business must consist wholly or mainly of providing directly or indirectly the services of an individual to third-party clients.

2.    The individual supplying their services receives payments, or an aggregate of payments and benefits, from the company equal to the greater part of the sums received from the third-party client. This test is applied on a cumulative basis.

3.    The payments received by the individual are greater than they would have been if they had been treated as employment income i.e.with Income Tax and NICs deducted. This comparison is performed each time a payment is made to the individual.

4.    There must be an ‘MSC Provider’ and that person must be involved with the company.

‘Involved’ is defined in the legislation by reference to any one of five activities:

1.    Benefiting financially on an ongoing basis from the provision of the services of the individual working through an MSC. This will usually apply where fee payments are directly linked to the worker’s income generation.

2.    Influencing or controlling the provision of the services of the worker e.g. through the provision of an engagement contract,dictating terms etc.

3.    Influencing or controlling the way in which payments to the worker or an associate are made e.g. the distribution of profits under a standardised product over which the worker has little control or influence.

4.    Influencing or controlling the company’s finances or any of its activities.

5.    Giving or promoting an undertaking to make good any tax loss.

In this context, influence does not mean the provision of advice. The important consideration when it comes to advice is whether it is truly tailored or just part of a standardised product.

 

The MSC legislation provides a specific exemption where persons are MSC Providers merely by virtue of providing legal or accounting services in a professional capacity. This only applies to persons holding (or training for) a professional qualification regulated by a regulatory body. 

At Acconomy all our clients are advised directly by a fully qualified, experienced accountant.

Get in touch with us if you think you may be affected by MSC rules

 

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