Budget - Composite Companies Dead!

[Ivor1]

Anyone any idea how long it will take for them to do the consulation and implement the law. Just wondering how long it will be till they come a knocking.

Also does any of the PCG insurance cover the cost of accoutants to look over your MSC figures to work out what you owe, I wouldnt just go with the revenue figures.

[swamp]

What does "The Intermediaries legislation will remain in place for Personal Service Companies." mean?

Intermediaries legislation == IR35
Personal Service Companies == Your Co. Ltd

[Ivor1]

Found the consultation doc published today link below, tab down a bit to the pdf doc

http://www.hm-treasury.gov.uk/pre_bu...edservices.cfm

[Nixon Williams]

Thought these FAQ's from the Revenue may help!

Managed Service Companies - FAQS

These FAQS relate to the measures set out in the consultation
document ‘Tackling Managed Service Companies’ published on 6
December 2007 and their aim is to make clear who is within the scope of
the measures.

The FAQs reflect the position outlined in the draft legislation contained
in the consultation document. The legislation finally enacted by
Parliament is expected to take effect from April 2007 and may of course
differ from the drafts published for comment.

What is a ‘Managed Service Company’ (MSC)?

An MSC is a form of intermediary company through which workers provide
their services to end clients. In the draft legislation ‘MSC’ includes both
‘composites’ and ‘managed personal service companies’. These are
discussed in detail in paragraphs 2.9 to 2.18 of the consultation document.

In essence a scheme provider promotes the use of these companies and
provides the structure to workers. The worker (although a shareholder) is
almost invariably not in business on his own account and not exercising
control over the company (he is not usually a director of the MSC). That
control lies with the scheme provider who has ongoing involvement in the
MSC, exercising financial and/or management control of the company.

Are these the same as Personal Service Companies?

No. The worker in an MSC is almost invariably not in business for himself and
does not have financial or management control of the company – unlike a
PSC where the worker is usually a director and controls the finances of
company and how it operates.

The PSC may receive advice and support from accountant or other
professional adviser, but this does not amount to ‘control’ in the way that a
scheme provider controls an MSC.

I operate through a PSC - will these new rules apply to me?

No – the new rules will apply only to those within the definition of MSCs set
out in the consultation. The Government welcomes comments on the draft
legislation and will introduce the final version in Finance Bill 07. You should
check that your company isn’t an MSC as defined in the legislation, but if you
are in business on your own account and control your company’s finances
and how the company operates, you will not be an MSC.

If you are in any doubt you should check with your accountant or the adviser
who arranged for the company to be set up.

I work through a PSC – has IR35 changed?

No. The Intermediaries legislation (IR35) will remain in place, unchanged, for
PSCs. The Government intends to remove MSCs from the scope of IR35 and is consulting on the legislation defining MSCs to ensure that it is targeted
accurately.

Consultations need to be in by 02/03/07 !!

Alan

[wendigo100]

Are these the same as Personal Service Companies?

No. The worker in an MSC is almost invariably not in business for himself and does not have financial or management control of the company – unlike a PSC where the worker is usually a director and controls the finances of company and how it operates.

So, if someone jumps from an MSC to a Ltd company, and HMRC come knocking re IR35, won't his history make it harder for him to prove to HMRC he is in business on his own account?

Is it easy for HMRC's IR35 compliance to get lists of MSC-to-Ltd-Co jumpers?

[Ivor1]

Had a quick scan read of the document all 75 pages of it, it didnt mention anything about the retro applying of the tax all the figures quoted in terms of what they would lose in revenue are based on the fact MSC in there current form remained. Wishful thinking on my behalf I think

[PerlOfWisdom]

http://www.hm-treasury.gov.uk/media/...6_chapter5.pdf

The word "fair" is used 56 times in this document.

[Cowboy Bob]

Had a quick scan read of the document all 75 pages of it, it didnt mention anything about the retro applying of the tax all the figures quoted in terms of what they would lose in revenue are based on the fact MSC in there current form remained. Wishful thinking on my behalf I think

Not in the document, but in the speech:-

The Government will also address the problem of MSCs escaping payment of tax and NICs due by allowing the recovery of these debts from appropriate third parties.

Third party = the contractor (if I understand that correctly)

We'll need to wait for the "Targetting Managed Service Companies" document to get the full details, but it doesn't look good for those who have used MSCs...

[malvolio]

Had a quick scan read of the document all 75 pages of it, it didnt mention anything about the retro applying of the tax all the figures quoted in terms of what they would lose in revenue are based on the fact MSC in there current form remained. Wishful thinking on my behalf I think

I think it is. The restrospective bit was announced (by Dim Prawn) just after the 2004 PBR, with the clear intention of giving Hector time to investigate and if necessary address various avoiance schemes wef that date. So even if you stop now, historical earnings will still be caught: and as someone else has pointed out, stepping from comp to YourCo will probably flag an IR35 investigation anyway.

The good news is you probably won't get fined, since you weren't aware of the pending change. The bad news is as I said - an average £25k (for a £350 a day bod working 40 weeks a year) plus interest.

[malvolio]

Not in the document, but in the speech:-

The Government will also address the problem of MSCs escaping payment of tax and NICs due by allowing the recovery of these debts from appropriate third parties.

Third party = the contractor (if I understand that correctly)

We'll need to wait for the "Targetting Managed Service Companies" document to get the full details, but it doesn't look good for those who have used MSCs...

Yep, it's your problem. The composite itself is doing nothing wrong and pays all the right taxes.

You read it here first - about a year ago...