Are you involved with an MSC Provider?- Part Two

Specific behaviours identify the involvement of an MSC Provider which leads to an MSC risk for company directors. So to help in determining MSC risk, the following can indicate that the accountancy firm used, could be treated as an MSC Provider by an HMRC employment status team. In short, MSC risk means that all company income would be retrospectively deemed to be employment income.

• You paid a weekly/monthly fee to the firm, which was deducted from the income paid to you via the potential MSC Provider, and when you stopped working for the agency/client that hired you, even while on holiday, you stopped paying the fees.
• If you did stop paying fees, an MSC provider would not send an invoice for accountancy services, would not file your company or personal tax returns, would not advise you further and most importantly would not have sent you a letter of disengagement; it would have simply ceased contact with you.
• The firm may have closed your company or allowed it to be struck off at Companies House, without generating a profit & loss statement or reporting the income that you received via a company or a personal tax return.
• You are, or were, not required you to sign off (agree to) your company accounts, you would not have been shown your company balance sheet or received any professional advice concerning your company’s financial position.
• Your company may not have an employer PAYE scheme under which?your director’s salary is or was reported (you can ascertain this by logging in to your personal tax account and looking at the relevant tax years).
• You did not determine what level of salary you draw as a director, nor have any input into the financial affairs or future of your company.
• If you had decided to move your company accounting to a new firm, a potential MSC provider would probably not have replied to a professional clearance letter.

This list describes only seven scenarios in layman’s terms, but HMRC will frame its argument around what is known as MSC legislation, which is found at Chapter 9, Part 2, Income Tax (Earnings and Pensions) Act 2003

It is worthwhile to take a look at this legislation plus the guidance at ESM3505 which is much easier to understand.

Future topics will expand on the definition of an MSC Provider and MSC risk, and also what to do if you find that you are caught by MSC legislation but can’t pay the inevitable tax debt.

As always, if you need immediate or tailored advice please contact me by InMail or at my email address, [email protected]