Tackling Managed Service Companies

The Government is today announcing action to tackle Managed Service Company (MSC) schemes and is consulting on draft legislation to implement this. Personal Service Companies will not be within the scope of these measures with the Intermediaries legislation remaining in place as at present. This action is explained in detail in the consultation document Tackling Managed Service Companies (PDF 453K), published today alongside the 2006 Pre-Budget Report, which also sets out the draft legislation and questions for consultation.

At Budget 2006 the Government announced that it would respond to evidence of significant growth in the mass-marketing of MSC schemes which are used to avoid paying employed levels of tax and NICs. There are existing rules - the "Intermediaries legislation" - to ensure that the correct tax and NICs treatment is applied, but these rules are, in the vast majority of cases, not being followed by MSCs. This gives them an unfair competitive advantage over compliant businesses and workers. There is also evidence that many workers are entering into MSC schemes without understanding that they may be giving up employment rights.

Chapter 6 of the consultation document summarises the questions for consultation and the draft legislation is set out in Annex B.

FAQS explaining who is within the scope of the measures are also published.

Update: 6 February 2007

Further draft legislation is being published today which allows the PAYE debts of MSCs to be transferred to appropriate third parties. These provisions were announced in the consultation document Tackling Managed Service Companies (paras 4.12-4.20). The Government would welcome views on whether this draft legislation achieves the aims set out in the consultation document.

A link to the new draft legislation can be found under ‘Media links’ below.

Comments on this consultation should be sent by 2 March 2007 to:

John Wrathmell
MSC Consultation
HM Treasury
Room 2/N2
1 Horse Guards Road
London
SW1A 2HQ

or e-mail: msc.consultation@hm-treasury.gov.uk

Telephone queries: 020 7270 6114

Please note the paragraphs on confidentiality disclosure (6.10 - 6.12).

'Tackling Managed Service Companies' is available in Adobe Acrobat Portable Document Format (PDF). If you do not have Adobe Acrobat installed on your computer you can download the software from Adobe. For alternative ways to read PDF documents and further information on website accessibility visit the HM Treasury accessibility.

Media links

Related links