29.07.16 Spotlight 32: Managed Service Company legislation, tax avoidance scheme

In the case of Christianuyi Ltd & Ors v Revenue and Customs, heard at the First-tier (tax) Tribunal (‘FTT’), HM Revenue and Customs (‘HMRC’) successfully argued that the managed service (‘MSC’) legislation applied to arrangements run by Costelloe Business Services Limited. As a result, today, they have published Spotlight 32.

Where a company is set up to provide a worker’s services to an engager and the MSC legislation applies, amounts paid to an MSC for those services that are not already subject to PAYE income tax and Class 1 NICs (for example, share dividends), are treated as employment income.

HMRC’s view, which is now supported by the Tribunal decision, is that these types of arrangements do not work. Enquiries are continuously opened into users of similar schemes that include workers supplied in many different industries, including road haulage, health, care and education. Investigations will be carried out by HMRC utlising every option available to them, including litigation, seeking full settlement of tax owed, plus interest and penalties to be sought after, where possible.

HMRC recommend that those using similar arrangements will settle what they owe with HMRC after their win at the FTT. If at any point it becomes clear that some part of the debt (tax and NICs) is irrecoverable, HMRC will transfer the debt to others, including the service company directors, the MSC provider and/or the directors and associates. All those mentioned are jointly liable for the debt.

To read Spotlight 32 click here.

Click here to read our previous blog on the case - http://www.aspirepartnership.co.uk/Blog_Detail.aspx?hid=6&nid=766