Income Tax & National Insurance Avoidance
Managed Service Companies | Kangs Advisory Team
John Veale of Kangs Solicitors considers the responsibilities of Managed Service Companies (‘MSC’).
Legislation was introduced in 2007 to prevent artificial tax advantages being gained through the intermediary of a company disguising the true level of earned income by, for example, the payment of low wages supplemented by unrealistic dividend payments.
Contractors/self-employed persons should be aware of trading situations where, as part of any contract that is offered, they are required to form their own limited company which is responsible for the payment of income tax and national insurance.
Income earned through a MSC is as liable to income tax and national insurance, and hence the scrutiny of HMRC, as any other earned income.
What constitutes a MSC | Kangs Tax Avoidance Prosecution Team
HMRC say that you may be operating a MSC if:
- The company’s business is the provision of a contractor’s personal services.
- The contractor receives more than the MSC in fees and overheads.
- The amount the contractor receives is greater than would have been the case if they had been employed by the MSC.
- There is involvement with a firm of accountants.
As, historically, service companies were frequently drained of funds and dissolved in order to avoid payment to HMRC the legislation introduced in 2007 sought to extend liability to third parties to prevent such activity.
The legislation is becoming more relevant now as HMRC endeavors to enforce debts of MSCs.
When the legislation came into force, providers of MSCs claimed that they could still circumvent the law and continue to provide the same sort of service to contractors and the self- employed with the result that HMRC has suggested that contractors should be vigilant when dealing with such companies.
MSCs | Potential Criminal Conduct | Kangs Criminal Solicitors
Operating a MSC carries responsibilities for payment of full tax liabilities to the Revenue.
If HMRC consider that the use of a MSC amounts to any form of scheme promoting tax evasion, cheating the revenue or any other financial fraud any individual involved may be subjected to criminal proceedings.
How We Can Help | Kangs Criminal Solicitors
If you have any concerns with issues covered by this article, you should not hesitate to contact team through:
Hamraj Kang
hkang@kangssolicitors.co.uk
07976 258171 | 020 7936 6396 | 0121 449 9888
John Veale
jveale@kangssolicitors.co.uk
0121 449 9888 | 020 7936 6396
