MSC rears its head by Seb Maley, CEO of IR35 and MSC compliance company Qdos

Compliance expert Seb Maley of Qdos shares the latest details regarding the Managed Services Company legislation

When it comes to tax compliance among contractors, it seems that if it’s not IR35, it’s MSC-related.

I am of course referring to the complex and confusing Managed Service Company (MSC) legislation, which reared its head in dramatic fashion recently and looks set to remain on the scene for some time to come.

The past couple of years have been relatively quiet on the MSC compliance front, but in March, Qdos was alerted to HMRC launching enquiries into at least 1,000 contractors who the tax office believes have breached the MSC rules.

As many of you will know, the MSC legislation was rolled out in 2007 to stop contractors from perceived tax abuse. Its aim is to prevent a limited company contractor, whose business is controlled by an MSCP, from enjoying the tax benefits of running their own business if the business itself is controlled by another party – effectively used as a vehicle through which to avoid tax.

This latest development regarding MSC is especially relevant to accountants, given HMRC also approached the two specialist contractor accountants that supported these contractors. The tax office is of the opinion that they played the role of Managed Service Company Providers (MSCPs).

You’re also no doubt aware that the MSC rules pose a significant risk not only to contractors but to accountancy practices and their directors, along with other parties in the labour supply chain, such as recruitment agencies and even the end client.

In this article, I’ll bring you up to speed and run through the latest developments surrounding this murky, vague tax legislation.

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