HMRC has issued a new paper entitled "How sure are you that your company is not a Managed Service Company"
The paper is aimed at providers of Umbrella Companies and off-shore providers but the implications have a direct bearing on the contractors who work through them.
To summarise, the key elements of the paper are as follows:
"HMRC considers that companies and partnerships which otherwise fall within the Managed Service Company legislation (that is, fulfil the criteria of Chapter 9 ITEPA), but claim not to be MSCs because the provider is an officer/partner of the intermediary, are MSCs. HMRC will now look for suitable cases to investigate and, where appropriate, challenge and litigate."
"Where HMRC challenges successfully. and that company is unable to pay the resultant PAYE and National Insurance debt, HMRC will invoke the transfer of debt provisions."
"It should be noted that simply because an intermediary is based outside the UK does not mean the Managed Service Company legislation does not apply. Those providing their services though companies based outside the UK should not assume that this fact alone exempts their company from the legislation and them from the consequences of non-compliance. If the provider and their associates are based outside of the UK tax jurisdiction, then the persons most at risk are individual workers based in the UK."
If you would like a full transcript of the HMRC paper you can find it here.
It is your responsibility to determine whether you provider is compliant. The following is a useful checklist for you.
Checklist for umbrella company
Properly managed umbrella companies like Gabem Umbrella comply with all current HMRC legislation and are completely outside of MSC legislation. Here are the points that you and your agency need to look for:
. You, the 'worker' must be an employee of the umbrella company provider with an overarching contract of employment
. Full PAYE tax must be deducted on all your deemed earnings
. Full Class 1 NIC must be deducted (Employers and Employees)
. Only expenses that are wholly, exclusively and necessarily incurred in doing the job are allowed
. Receipts are required for all expenses, except for scale rate on mileage claimed (Gabem makes checks to safeguard it's contractors).
Checklist for self-employed
The key point here is that you must be legitimately self-employed (according to HMRC guidelines) the 'provider' is responsible for checking your employment status (see the guidelines for determining genuine self-employment).
. Your provider must validate your self-employed status for each assignment. You can only be paid as self-employed if you satisfy the HMRC guidelines on self-employment as embodied in IR56
. If for a particular assignment the self-employed criteria are not met, you would need to be either paid through an Umbrella Company or as PAYE.
. This ensures your provider is not 'a nominee of the worker' as defined in the HMRC document. The terms of contract are supported by the due diligence on employment status, so payment can be made to the self-employed sub-contractor under deducted status.
Gabem Solo is for self-employed individuals and we carry out the necessary checks to ensure it's contractors fall safely within the legislation.
If you would like us top discuss your particular situation please provide us with your contact details and we will call you back or call us directly on 01798 861 100.
