PRESS RELEASE
30th April 2007
There has recently been much confusion created and misinformation circulated within and about the contracting industry. Largely this has been whipped up by the sudden withdrawal of several of our competitors from the limited company accountancy market.
Avoiding a detailed review of the legislation and subsequent commentary (of which so much has been written over the past few weeks), and now having paused for a breather, we shall attempt to explain the reason for the confusion and then state JSA’s position under the proposed legislation.
Simplistically, and if the latest draft legislation becomes law without further amendment, a Managed Service Company (MSC) must operate PAYE on its income from April 6th 2007 without the opportunity to claim employment expenses or to pay a dividend.
A furore has been caused by the last minute and unexpected inclusion in the proposed legislation of the definition of an MSC Provider ( “MSP”) – one who “promotes or facilitates ” the use of the company providing the services. The Treasury’s intention was to drive out those erstwhile MSP’s who had shown their intent to switch to portray themselves as Accountants. They did this by linking the
involvement of an MSP with an MSC, whereby an MSC will fall foul of the proposed legislation where it uses the services of an MSP.
Unfortunately it has not been easy for the Government to distinguish between an MSP and an accountant who provides professional accountancy services, and it is this difficulty that has lead to the confusion.
The Government has defined an MSP as:
(a) Benefiting financially on an ongoing basis from the provision of the services of the individual,
(b) Influencing or controlling the provision of those services,
(c) Influencing or controlling the way in which payments to the individual (or associates of the
individual) are made,
(d) Influencing or controlling the company’s finances or any of its activities, or
(e) Giving or promoting an undertaking to make good any tax loss.
However the proposed legislation does include the following important exemption from being an MSP:
“A person does not fall within subsection (d) merely by virtue of providing legal or accountancy services in a professional capacity ”.
Clearly the leap from being an MSP to a professional accountant is more than some of our competitors could manage and so they have chosen to withdraw from this market and concentrate on providing PAYE Umbrella services instead. Some of them have made outlandish and misleading claims, no doubt suiting their new business model.
While it is certainly true that just being a professional accountant will not necessarily provide the exemption from being classed as an MSP as some of our competitors are claiming, JSA have spent a great deal of time and money determining our position. After consulting with leading Tax Counsel, specialist Solicitors and many others within the industry, JSA are confident that our accountancy services do NOT fall within the meaning of an MSP for the purposes of the proposed MSC legislation.
For clarification:
- JSA’s fees are fixed at the commencement of a years’ service and do not then vary according to our clients’ earnings.
- While JSA do of course provide advice and guidance as professional accountants and tax advisors, we do NOT directly influence or control our clients’ activities.
- JSA are NOT signatories to our clients’ company bank accounts, nor do we assume any statutory role within the company.
- We do NOT promote or undertake to make good any tax loss.
- JSA have been accountants, regulated by the Institute of Chartered Accountants in England & Wales, since 1989.
While there can be no absolute certainty with new and as yet still draft and untested legislation, based on the advice received from our respected advisors (and indeed some of the statements now emanating from the Treasury and HMRC) JSA can continue to support our Limited Company clients’ activities as accountants, without fear of anyone falling foul of the MSC legislation.