The Managed Service Company

A Managed Service Company (MSC) is a company that manages and controls part to all aspects of the running of your Limited Company. It should not to be confused with a standard accountancy service, which provides best advice on the running of your company.

The differentiator here is who controls the financial aspects of the business? Is it the service provider or you? If it is the service provider, then they are under an MSC, and due to the MSC legislation, they are unable to receive dividends.

Managed Service Companies (MSC) legislation came into force in the 2007 Budget. It was designed to further enhance and strengthen the existing IR35 legislation in preventing tax avoidance and evasion. This principle of IR35 is that income should be taxed dependent on its nature (deemed employment or not).  In other words, income generated from true employment should be taxed as such.

IR35 struggled where contractors hid their true status by operating pay through a larger company (formally known as a Composite). The government sort to ensure that these individuals working through a company or a scheme provider, where the underlying nature of the contract is one of employment, Tax and National Insurance contributions (NICs) should be paid at employed (PAYE) levels.

According to HMRC, in contrast to Personal Service Companies (PSCs), workers using MSCs are invariably not in business on their own account, which hides their true employment status. HMRC took the view to remove the ability for these candidates to hide their status and enforced that all MSC provides were to now tax it’s candidates akin to PAYE. Leaving the candidates who were truly self employed to set up PSCs should they wish.

JSA uses qualified accountants to advice on it limited company services.  To ensure compliance, JSA leaves the running of your limited company to you.

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