Contracting Matters

Last Wednesday, we saw HMRC issue some updates in relation to Managed Service Company (MSC) legislation. Since the MSC legislation came into force (April 2007) we had seen a wealth of “tax efficient” solutions spring up – many claimed very high returns for Contractors and the amount of money that was pumped into legal advice and Google advertising meant that they will have been attractive to many.

Seems HMRC took some legal advice of their own and have said, “HMRC will now look for suitable cases to investigate and, where appropriate, challenge and litigate. HMRC is aware that some Service Providers claim to be in receipt of counsel’s opinion that their particular intermediary does not fall within the Managed Service Company legislation. Such opinions do not alter HMRC’s view regarding whether or not the Managed Service Company legislation applies.”

They also go on to address how some of the offshore schemes could be at serious risk, “It should be noted that simply because an intermediary is based outside the UK does not mean the Managed Service Company legislation does not apply. Those providing their services though companies based outside the UK should not assume that this fact alone exempts their company from the legislation and them from the consequences of non-compliance. If the provider and their associates are based outside of the UK tax jurisdiction, then the persons most at risk are individual workers based in the UK.” So if you are thinking of or have joined a “sexy” tax solution then be aware that HMRC are looking at Contractors and all the QC opinion in the world won’t keep you out of court.

I guess it comes down to your attitude to risk; do you put your savings and property on the line for a better return today and worry about the consequences tomorrow? In these tough times that answer is even harder to address I suppose but HMRC are on the prowl, do you want the hassle (at best) or the costs (at worse)?

I know it’s dull and repetitive but we have never put Contractors livelihoods at risk and will continue to promote sensible and compliant solutions. I do not think it is in any of our interests to force HMRC to continue to clamp down, a too good to be true solution is nearly always built on some rocky promises.