Frequently Asked Questions - individuals

What is a ‘Managed Service Company’ (MSC)?

A. An MSC is a form of intermediary company through which workers provide their services to end clients. The definition of an MSC in the legislation encompasses both ‘composites’ and ‘managed personal service companies’.
In essence a scheme provider promotes the use of these companies and provides the structure to workers. The worker (although a shareholder) does not exercise control over the company.

How can I tell if I am working through an MSC?

A. If you are not paid directly by your agency, your client or the person engaging you, and if:

  • you’re paid via a limited company
  • someone else manages and administers your company
  • you’re paid partly in salary and partly in dividends
  • a fee is deducted from your pay for this service.

Then you may be working through an MSC. And if you are a director of the company, you have personal responsibility for various obligations under company law regardless of the fact that the company may have been set up and run wholly on your behalf.

I work through an MSC. What has changed?

A. Your company must deduct Income Tax and NIC on all payments you receive from the company

What is the tax liability for individuals providing their service through an MSC?

A. Individuals are required to pay tax and NICs under the PAYE.

I work through an MSC, what should I do now?

A. The legislation does not mean you cannot continue to operate through an MSC but you need to consider the tax implications of this legislation.

I work through an MSC that complies with IR35. What do I have to do now?

A. If your service company falls within the new definition of an MSC, from the date the new legislation has effect IR35 will no longer apply. Instead you must apply the new legislation.

I provide my services through a company. Am I affected by the legislation?

A. Yes – if you are working through an MSC. Personal Service Companies are not within the scope of this legislation.

If you are in doubt you should check with your accountant or the adviser who arranged for the company to be set up.

I operate through a PSC. Will these rules apply to me?

A. No – the rules apply only to those within the definition of MSCs. You should check that your company isn’t an MSC as defined in the legislation, but if you are in business on your own account and control your company’s finances and how the company operates, your company is not an MSC.

If you are in any doubt you should check with your accountant or the adviser who arranged for the company to be set up.

I work through a PSC. Has IR35 changed?

A. No. The Intermediaries legislation (commonly known as “IR35”) will remain in place, unchanged, for PSCs. The Government is removing MSCs from the scope of IR35 and has consulted on the legislation defining MSCs to ensure that it is targeted accurately.

I work through a PSC. Can I still claim the cost of travel and subsistence relating to my contracts?

A. The rules for PSCs are unchanged.

What should I do if my company provider tells me that I am not affected by the new legislation?

A. If you have any doubt you should seek independent advice. If you are affected by the legislation and your company fails to apply it you could be held personally liable for the company’s debts.

How do I tell whether I’m working through a PSC or MSC?

A. If the person who originally set up your company has recently set up a new one, you may well be in an MSC. If you are not in business on your own account and do not fully control all aspects of your company it is likely that you are in an MSC

Does the legislation mean that I cannot obtain comprehensive accountancy support in running my company?

A. No, you may still obtain comprehensive accountancy support. But HMRC considers that there is a clear distinction between comprehensive accountancy support to a PSC, and involvement with an MSC by an MSC provider.