Under the managed service company legislation, contractors who don't follow the rules may find that they owe a lot of money to the Revenue. Indeed, the contractor will be assessed for tax on income and unpaid National Insurance contributions if it is found that the limited company the contractor is working for is or is part of a managed service company.
Professional Passport, a new organisation which is to launch in January 2008, will be able to help contractors with this challenge.
Run by a group of experts with long experience in the contracting industry, Professional Passport has been working closely with HMRC on these issues since the initial announcements of the managed service legislation last year.
A Significant Development
''This is a significant development, and an important step towards creating stability and confidence in our marketplace,'' says Barry Roback, CEO of the Watford-based chartered accounting firm JSA which specialises in contractor affairs.
Greater Certainty
This is a significant development and an important step towards creating stability in our marketplace
Barry Roback-JSA
Professional Passport has developed a set of audit standards for providers--accountants, lawyers, company formation experts-- in an attempt to give contractors a little more certainty about the people they are working with. Under the current legislation, contractors do face tax penalties if they wind up working with a managed service company, and Professional Passport should be able to set some standards to ensure that there are some who are at least qualified as safe to work with.
There is no perfect assurance possible, as the Revenue itself is not legally bound to certify any such scheme as compliant. But having access to a set of standards which the entire industry has accepted will make the entire process of compliance easier for contractors.
Professional Passport believes that it is wrong that the legislation, as it stands today, affords no protection to the contractor regardless of the efforts the contractor makes in assessing and selecting providers who are compliant.
Contractor Is The First Stop
The contractor is always the first stop for the Revenue when it finds that a contractor is using a managed service company; you will be assessed for back taxes if that is the case.
Then, if you can't pay, the Revenue will seek to obtain payment from your agency and from the other service providers who got you working with the MSC.
Danger From Unscrupulous Providers
For now, there is no agency or organisation that checks on providers. The Revenue did float a scheme in which such companies could be audited for compliance, but that scheme is now apparently going to take a long time to become operational. As Adrian Marlowe, managing director of the Hove-based legal consultancy Lawspeed points out, there are some serious legal challenges to be overcome before such a scheme could be put into practice.
As a result, there is nothing to prevent unscrupulous providers from entering the market unchecked, and indeed some have and these are putting contractors at risk,'' Roback adds.
Professional Passport believes that it is wrong that the legislation as it stands today affords no protection to the contractor regardless of the efforts the contractor makes in assessing and selecting providers who are compliant
Professional Passport
HMRC is now entering into further discussions with organisations and professional bodies on the way forward for a form of standards in the market. Professional Passport will be heavily involved in these discussions and is keen to support arguments with comments and views from the contractors. Please let us here at Contractor Calculator know what you think.