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MSC Compliant
Both or our Umbrella Company Solutions, Expat Advantage and Payroll Umbrella are 100% Managed Service Company (MSC) Complaint. Payments made to freelance contractors using our umbrella solutions are subject to Pay as You Earn (PAYE) deductions; at no time is any type of profit payment made.To speak to an expert about umbrella company solutions, going into business with a limited company or the Managed Service Company Legislation call Commonwealth Contractors now on 0800 294 4388!
What is the Managed Service Company Legislation?
The Managed Service Company Legislation was a reaction by the Government to the problem of Composite Companies and as they were finding it difficult to pursue IR35 cases. With its introduction in April 2007 the Government effectively removed UK Composite Companies as a viable option for UK freelance contractors.Any company now considered a Managed Service Company must operate a PAYE scheme and pay freelance contractors subject to employed levels of Income Tax and National Insurance.
What was a Composite Company?
A Composite Company offered freelance contractors a contracting structure that allowed them to avoid paying employed levels of income tax and national insurance on contract billings.Composite Companies were set up and run by a scheme provider who bundled freelance contractors into limited companies of perhaps about 15 contractors. The contractor was given non director shareholdings and received dividends from the company as well as a small salary and business expenses. The scheme provider administered the scheme for a fee and normally took care of the contractor’s tax affairs.
All freelance contractors using Composite Companies were supposed to be outside IR35 to qualify but in reality scheme providers were offering composite company structures to contractors regardless of IR35 status. As IR35 was largely being ignored and the HM Revenue and Customs was finding it difficult to build a case against contractors using Composite Companies the Government decided to act.
What is the effect of the Managed Service Company Legislation?
As of April 2007 the contracting landscape changed as Composite Companies were effectively removed as an option for freelance contractors. The contracting options that now exist are largely:- Agency Payroll (seldom the best option for any contractors above £10 per hour)
- Umbrella Company
- Contractor Limited Company (Personal Service Company controlled by the contractor/director)
The best solution for you often depends upon a number of factors including; your IR35 status, your nationality and work visa status, whether you are happy to undertake business administration, your long term contracting intentions, your contract rate etc.
Freelance Contractors using our umbrella company solutions benefit from an all inclusive service. All you have to do is send us timesheets and expense claims, we do the rest. There is no need to worry about IR35 or the MSC Legislation as all income is paid through the PAYE scheme.
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