Managed Service Companies - HMRC takes first steps to monitor compliance

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HMRC has announced that letters are about to be issued to known service providers whom HMRC believes to be operating Managed Service Companies. Where the new legislation applies, such providers should not be operating PAYE and NICs on payments made to the workers in such companies.

The letters will asks service providers for limited information on the business models provided to clients and the numbers of clients within each business model. Provision of the information is purely voluntary but, as many service providers advertise their business models, HMRC anticipates a good response.

HMRC is concerned that some recruitment businesses are refusing to deal with service providers who provide service companies to workers for fear of being caught by the transfer of debt provisions of the new legislation. Guidance from HMRC is that the legislation was not introduced to stop workers who are genuinely in business on their own account providing their services through service companies and that recruitment businesses should take a balanced view of their risk under the transfer of debt provisions.

HMRC has also commented on claims by some service providers that offshore arrangements providing the services of workers to UK clients fall outside of the legislation. However, where a worker is resident in the UK and the work is carried out in the UK, the provider is treated as having a place of business in the UK and, subject to other qualifying criteria, the legislation does apply.

...UK Payroll News - Latest

Further information:
Monitoring the effects of the legislation

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