Managed Service Company - What's in Store?

Early last year, a Freedom of Information request revealed that Managed Service Company (MSC) enquiries rose sharply from figures recorded in 2012. As at stood at April of 2012, the number of live MSC enquiries stood at 216 but this soon increased to 860 by November of that year. With 2014 laid out before us, people are asking:

‘What’s in store for the MSC legislation?’

The Managed Service Companies (MSC) legislation was implemented in 2007, and in recent years, HMRC activity in this area has been given little publicity, and concern over the legislative laws that surround MSC are scarce.

It is understandable that some may not feel threatened by HMRC regarding MSC, as little has been reported of its movement throughout the past 5 years.

It appears however that this is going to change, as MSC enquiries have substantially increased in number since April 2012. Following two Freedom of Information requests received by recruitment law firm Lawspeed, as of last year we can now see that the number of live MSC enquiries as at April 2012 stood at 216. Seven months down the line however and a further 644 enquiries were initiated, taking the total to 860 as at November 2012.

*Since April 2011, 142 third party debt transfer notices have been issued.*

“Anybody who believed HMRC had lost interest in this legislation may need to readjust their thinking.” Andy Vessey

During an MSC investigation, HMRC will first look into the managed service company provider, making it essential that compliance and correct procedures are put in place.

With 2014 ahead of us, it is doubtful that the Revenue have little planned for the legislation. With talks of increasing their ‘tax crackdown’, HMRC are expected to follow suit in their amplified approach to enforcing the IR35 legislation, with the taxman taking a prolific stance in targeting managed service companies.