Latest Giant Scare Tactic

[Royston Vasey]

Didn't I just say that ?

http://forums.contractoruk.com/thread16136.html

[JonnoWeb]

Contractors and recruitment agencies who deal with any specialist providers of services to one man limited companies, regardless of whether they are regulated by an accountancy body or not, will be risking financial ruin, under legislation published in the Finance Bill, warns giant group plc, the contractor services provider.

Last Thursday (29/03/07), following publication of the Finance Bill, the Regulatory Impact Assessment & Explanatory notes, it became clear that all specialist providers of services to one man limited companies would no longer be able to provide those services.

Throughout the legislative process, giant has been advised by KPMG and Deloitte, two of the Big Four accountancy firms, a leading QC, and Baker & McKenzie, one of the world's largest law firms.

John Chaplin, Tax Director, at KPMG, says: "Many service providers seem to be relying on the so called accountancy exemption as a reason for not accounting for PAYE/NIC under the proposed MSC legislation. In my view it's naive to believe that the Treasury would allow a loophole whereby PSC service providers could claim that by merely being a member of an accountancy body or employing an accountant that they would be exempt from the legislation."

From April 6 2007, contractors who receive services from specialist providers of services to one man limited companies risk attack by HM Revenue & Customs for avoiding tax and National Insurance. A typical contractor earning £50,000 a year will be liable for £10,000 in unpaid tax and NI, plus interest and fines.

From January 2008, recruitment agencies conducting business with specialist providers of services to one man limited companies could be liable for any debts which HMRC deems impracticable to recover from its contractors, potentially running into millions of pounds. From August 2007 directors and associates of recruitment companies will be liable, though that anomaly may be removed in the final legislation.

In order to fully comply with this legislation and to shield its clients from unacceptable risk, giant group will no longer be providing services to one man limited companies. The unequivocal advice giant has received is that the only operating model will be umbrella services, which it will continue to provide via its award-winning giant strongbox service.

Matthew Brown, Managing Director, giant group plc, comments: "Contractors should disregard claims made by some specialist providers of services to one man limited companies that membership of a professional accounting body exempts them from this legislation. All specialist providers of services to one man limited companies are caught without exceptions. Contractors' only option is an umbrella company."

"The Treasury would have to be incredibly foolish to introduce this legislation, only to allow specialist providers of services to one man limited companies to sidestep it and carry on business as usual, simply because they have a badge which says 'professional' accountant. That is not going to happen."

He adds: "Make no mistake: HMRC is determined to drive specialist providers of services to one man limited companies out of business regardless of agencies and contractors being damaged in the process. Contractors and agencies conducting business with specialist providers of services to one man limited companies from April 6th 2007 will be operating on the wrong side of the law and will be risking severe financial penalties."

John Chaplin, Tax Director, of KPMG says: "This is the end for companies specialising in promoting and facilitating tax advantageous services to one man limited companies, regardless of whether they are badged as 'accountants' or not."

John Chaplin at KPMG goes on to say: "Contractors and Agencies that deal with one man limited companies in this way run the risk of becoming personally liable for any HMRC tax loss."

The HMRC Guidance Note (clause 24) states quite clearly that professionally qualified persons are included within the scope of the legislation if they are involved in 'promoting and facilitating' services to one man limited companies. Clause 24 states: "The Term in a "professional capacity" means that professionally qualified persons [accountants] normally would not be considered to be an MSC provider except to the extent that they are in the business of promoting and facilitating the use of companies to provide the services of individuals [one man limited companies]."

On April 6th 2007, all giant contractors will be moved to its giant strongbox umbrella service, where they can continue to offset business expenses and benefit from other unique services.