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MSC Involvement
Since April 2007 freelance contractors have two real options, they can either use an Umbrella Company solution such as Expat Advantage or Payroll Umbrella or go into business with a Contractor Limited Company.If opting for a limited company it is still important to consider the Managed Service Company Legislation as some organisations may still be considered MSC Scheme Providers directly or Indirectly ‘Involved’ in the company.
Indicators of services that would normally not constitute being ‘Involved’
Many services provided to limited company contractors’ fall outside the intended scope of the MSC Legislation and do may not constitute being involved in the company. It is important that any services provided are done so at the request of the client (director of the limited company) following receipt of tailored professional advice and not as part of a standardised product. Providing bespoke professional advice to a client does not constitute being involved in the client company.Services that would normally not constitute being ‘Involved’ include:
- Managing limited company formation
- Acting as a Registered Office for the client company
- Registering companies for VAT, Corporation Tax and PAYE
- Preparing VAT, Corporation Tax and PAYE returns
- Providing advice on whether IR35 applies to a particular contract (so long as the service provider has no involvement whatsoever in the contract with any of the parties in the contractual chain)
- Advising on a remuneration package
- Advising on expense claims
- Preparing sales invoices
- Submitting sales invoices to clients of a company
- Operating a payroll
- Preparing weekly/monthly payslips and producing employers’ payroll returns, such as P35 & P11Ds
- Preparing management accounts and financial statements
- Providing support on secretarial matters, such as drafting of minutes and preparing annual returns
- Providing group insurances (including employers and public liability)
Indicators of services that would constitute being involved in all circumstances
- Providing a standardised solution (not applicable to umbrella companies as all income is employment income)
- Being a director of client companies
- Being the company secretary of client companies
- Managing the company bank account or the company’s finances through a separate account
- Charging fees based on the number of invoices raised/payroll runs
Indicators of services that may constitute being involved depending upon the scope of the activity
- Maintaining cash balances on behalf of the company to meet Corporation Tax, PAYE and VAT liabilities. This depends upon:
- How company funds are transferred
- The control exercised by the company and what happens to bank interest on the sums. If balances are under the advisors control and interest is retained by them it is likely the adviser is involved
- Paying Corporation Tax, PAYE & VAT liabilities on behalf of the company using cash balances held
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