A. It deems all payments received by a worker working through a MSC to be employment income.
This means that PAYE (and from 6 August 2007 Class 1 National Insurance contributions) must be applied to all income received by individuals in Managed Service Companies in relation to their services provided through the Managed Service Company.
The legislation applies whatever the form through which the worker receives their remuneration.
Where a Managed Service Company is unable to pay its PAYE and NIC liability, its debt can be transferred to a third party. These include the company’s director, the MSC Provider, and in certain circumstances, other third parties.
A. Primarily individuals who provide their services through Managed Service Companies, since the legislation is about the taxation of income received by such persons. But the legislation also affects persons who make Managed Service Companies available (MSC Providers) and under certain circumstances other third parties involved with MSCs.
Where a Managed Service Company is unable to pay its PAYE and NIC liability, its debt might be transferred to a third party including initially MSCs’ directors and the MSC Provider.
A. A specific part of this legislation allows PAYE and NICs debts due from the MSC to be transferred to appropriate third parties. Debts may be transferred to the MSC’s director, or the MSC Provider, or a person who has directly or indirectly encouraged, facilitated or otherwise been actively involved in the provision of the services of the individual through the MSC.
A. Yes - if the company structure is within the MSC definition.
A. No – provided that all employers’ income is treated as employment income.
A. Yes. A consultation document was published on 6 December 2006 inviting comments by 2 March 2007. The document is available on this site via the Legislation and associated documents link.
A. No. There is no question of the Government outlawing service companies. These rules simply mean that workers in MSCs have to pay employed levels of tax and NICs.
A. HMRC does not stipulate who can work through limited companies. But the legislation does stipulate the tax consequences of working through different types of company.
A. Yes, if the company through which the services were provided prior to 6 April was a managed service company as defined in Chapter 9.
The legislation is effective in respect of payments received on or after 6 April 2007. At the time of payment, the person making the payment is in a position to determine whether the company through which the worker provided their services was or was not a managed service company.
A. The amount produced by Step 2 of the Deemed Employment Payment calculation is taken to include both the Deemed Employment Payment and the Employers National Insurance Contribution due on it. Once the NICs legislation is enacted the Employers NICs will be due to HMRC with the Deemed Employment Payment being subject to Income Tax and Employees NICs.
Until the NICs legislation supporting Chapter 9 is introduced, there is no requirement to pay the assumed amount of Employers NIC to HMRC. The assumed amount of Employers NIC is not allowable as a deduction from the company’s chargeable profits.
Workers should be aware that if the company does not pay earnings liable to Class 1 National Insurance Contributions, and therefore they pay no National Insurance Contributions, this may affect their entitlement to state benefits.
A. If the value of your taxable supplies is over a specific limit, you need to register for VAT, unless your supplies are wholly or mainly zero rated in which case you may apply for exemption from registration. The limit from April 2007 £64,000.
A. A Company may voluntarily register for VAT even if the value of their taxable supplies is below the specific limit. That is a choice for the company.
HMRC operate a Flat rate scheme which simplifies VAT accounting by applying a flat rate to VAT-inclusive turnover. The scheme is available to businesses whose annual taxable turnover (not including VAT) does not exceed £150,000. However, any MSC wishing to use the scheme must demonstrate that it is not associated with another business before its application can be accepted.
The flat rates are calculated as an average of the net VAT paid by a particular trade sector. As MSCs do not adhere to a normal sector profile HMRC may refuse use of the scheme in order to protect the revenue.
A. Employment agencies need to be clear regarding their obligations under the CIS in terms of payments made to contractors.
