Managed Service Company Investigations - MSC Survivors Group

HMRC have recently progressed investigations into contractors and their accountants, and begun issuing letters to contractors indicating they are caught within the Managed Service Companies Legislation ("MSC").

If you are one of these contractors, then you must act.

Key points:

• The MSC legislation contains brutal debt transfer rules, which can make the contractor personally liable.
• HMRC can demand tax under normal enquiry windows for the last 4 years.
• Under the MSC legislation, if the contractor is caught, all monies need to be treated as income, a bit like IR35 – irrespective of the IR35 position.
• Additional tax bills are likely to be 15%+ of the revenue already earnt.
• The tax liability initially sits with the contractor's company. Then, via debt transfer rules, it passes to the company's directors. If neither the contractor nor its directors can pay, it passes to the accountant.

Are you in scope of being investigated under MSC?

How do you know if you are under threat?

Questions to ascertain if you are under threat:

1. Have you received a letter from HMRC?
2. Has your accountant informed you that they are being investigated by HMRC for the MSC legislation?

If you have not had a letter, then it may be prudent to ask your accountant if HMRC have opened an enquiry with them based on the Managed Service Company Legislation.

MSC tax defence: What should you do

If you have had a letter from HMRC, then it needs to be dealt with.

Are you insured? If you have tax investigation insurance, then speak to your insurer immediately. Failure to inform them early may invalid a later claim.

If you are not insured, then you will need to take advice from tax defence specialists who understand the Managed Service Company Legislation.

Note: Specialist tax professionals, with decades of experience, will charge for their time, and do not work on a contingent no-win no-fee basis.

ContractorCalculator has known David Kirk, at David Kirk & Co Limited, for many years – he has the expertise and experience to help contractors and businesses with enquiries related to MSC.

Jointly we have set up the MSC Survivors Group, to pool resources, and help those contractors who do not have any insurance that covers them.

Next steps:

If you already have tax investigation insurance you should speak to your insurer, otherwise complete the form below and we will be in touch.

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