Managed Service Company

[NomDePlum]

As part of a rate renegotiation with one of the larger Tech Consulting firms they are proposing to 'go down a Managed Service' route via the Agency that my ltd company is currently engaged via. To add complication my company is engaged by the Tech Consulting firm to work on a Public Sector project.

This route is being proposed to speed things up and I'm trying to get an understanding of the implications this might have. Does anyone have any experience of what this might mean? I've had a look through the forums and at some of the HMRC site but still have no clearer idea.

I'm going to talk to my accountant but things are moving quickly so was wondering if there was any experience of this.

From the information I can see on HMRC site using a MSC means that a new set of legislation applies but IR35 does not.

I can maintain my current structure but would have to defer any negotiated rate rise as this would take longer than the MSC route.

[northernladuk]

You are mixing two completely different things.

There is a managed service contract where by the supplier delivers a service back to the client, doesn't matter how many people etc, they pay for the service, not the bodies.
https://en.wikipedia.org/wiki/Managed_services

and there is Managed Service Companies relates to how you as a contractor run your affairs. The MSC Legislation applies to this but this is nothing to do with the situation you are in. http://www.contractoruk.com/managed_service_companies/

You are being pushed from a one man limited where you are on T&C and possible a counted head to hiding behind an overarching contract and payment with a different supplier. It's a common way of shifting contractors around and clearing them off the list. I was at Telefonica years ago and they had to reduce the number of contractors through the agency so they just put them all through one of the Managed Services. Accountants and Management were very happy as they achieved a 100% success rate saving a fortune on contractor payments, client managers and contractors and agents were happy as it was business as normal, Managed Service company were laughing their tits off cause they were charging 10% extra on top back to Telefonica for nothing

Well I think that's what's happening from what you say.

Have you seen any contractors or schedules of work? Who will your contract actually be with? Is it fixed price or still per day? You need to be asking all the parties involved exactly what's going on. I think the way you've worded it is a little confusing.

You also say they are doing this to speed things up but in the last line you say it will take longer?

[NomDePlum]

Agreed northernladuk there is a fair chance I am confused here. I have just had the conversation so am short on details. I am trying to put in some prep to make sure I don't start agreeing to something blindly.

The new arrangement would still be via existing agency. Rate will still be per day.

Reading through the link you gave for Managed Service Companies that sounds very much like an employee relationship rather than a company one. And one which the taxman has previously pursued so that's not sounding very promising.

My last line refers to staying with status quo (not Managed anything). But the implication would be the rate rise would be delayed as that route takes longer.

[LondonManc]

Agreed northernladuk there is a fair chance I am confused here. I have just had the conversation so am short on details. I am trying to put in some prep to make sure I don't start agreeing to something blindly.

The new arrangement would still be via existing agency. Rate will still be per day.

Reading through the link you gave for Managed Service Companies that sounds very much like an employee relationship rather than a company one. And one which the taxman has previously pursued so that's not sounding very promising.

My last line refers to staying with status quo (not Managed anything). But the implication would be the rate rise would be delayed as that route takes longer.

Any rate rise under an MSC agreement would probably be negated and then some by falling under IR35.

[NomDePlum]

So does a MSC agreement pretty much guarantee being within IR35?

[Willapp]

So does a MSC agreement pretty much guarantee being within IR35?

I would say it has to be - how could you argue to HMRC that you're delivering specific objectives to the end client when, as far as the client is concerned you're simply part of a large mass of resource provided by the MSC with probably a vague remit to provide "IT services".

[missinggreenfields]

So does a MSC agreement pretty much guarantee being within IR35?

Ask yourself the following questions:

1) Am I subject to the supervision, direction and control of the client / end-client / anyone in the chain?

2) Am I missing an unfettered right of substitution from the contract?

3) Is there a mutuality of obligation between the parties?

If the answer to all three of those questions is "yes" then you are inside IR35; if the answer to any one of those questions is "no" then you are outside IR35.

There is no different test than for any other contract.

[Andy Hallett]

MSC = Bad
MSP = Fine

Two very different beasts.

From reading your post it is MSP.

[NomDePlum]

Not sure what MSP is in this context but if you are predicting I am talking about a Managed Service CONTRACT and not a Managed Service COMPANY you are indeed right.

I've still to receive the paperwork but had quick chat with Bauer & Cottrell person and the impression I have been given is it will come down to the conditions of the contract.

[northernladuk]

MSP = Managed Service Provider.

https://en.m.wikipedia.org/wiki/Managed_services