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MSC guidance
Without any obvious announcement to let taxpayers know, HMRC have published guidance on managed service companies on their website; see www.hmrc.gov.uk/employment-status/current.htm.
This follows the changes in Budget 2007 to the legislation relating to managed service companies. HMRC explain in the guidance that the consequence of this legislation is that MSCs treat all payments received by workers providing their services through such companies as income subject to PAYE and Class 1 National Insurance. ITEPA 2003, Part 11 s 688A also introduced transfer of debt provisions whereby the PAYE and NI debts of MSCs, which are irrevocable from MSCs, can be transferred to third parties (Note that the debt transfer provisions come into effect for managed service companies and providers from 6 August and for other third party parties on 6 January 2008.)
HMRC say that the guidance is intended for any person operating through a service company, the service provider and parties with whom he does business in order that in the first instance a decision can be made as to whether or not the legislation applies and, if it does, how to operate it.
They add that the guidance is intended both to clarify aspects of the legislation where HMRC have received feedback that there is perceived ambiguity, and to make their position clear regarding its intent to ensure that the legislation meets Government's intent.
David Smith of Accountax welcomes the guidance, saying that it is helpful to know what HMRC think. However, he says that if ten pages legislation requires 70 pages of guidance, the legislation must be of dubious clarity. Much of the guidance appears to have no 'statutory link' to the legislation, and its overall appearance seems to be somewhat rushed.
