The new legislation on managed service companies imposes employee levels of PAYE and NICs on contractors who use them, meaning they can no longer reduce their tax bills by arguing they are outside IR35.

The finance bill definition is important because if a managed service company has not deducted the correct tax and NICs, these debts can be transferred to a range of third parties, including the MSC provider.

Many accountants provide services to service companies – payroll or tax advice (explaining IR35 for instance). Does this make you an MSC provider? The good news is the legislation includes an exemption stating that an individual is not regarded as within the definition ‘merely by virtue of providing legal or accountancy services in a professional capacity.’

The key question is what this exemption covers. Does it include services provided by in-house accountants who happen to work for an MSC provider as part of the structure of the provider’s business? Are these accountants providing their services ‘in a professional capacity,’ or does the exemption only cover those in public practice? Must one have a practicing certificate from a recognised professional body?

HM Revenue & Customs says that ‘professionally qualified persons normally would not be considered to be an MSC provider except to the extent that they are in the business of promoting and facilitating the use of companies to provide the services of individuals’. At first reading this seems rather circular – accountants who advise service companies may be concerned they are facilitating the use of businesses to provide the services of individuals.

One element of comfort can be derived from the first part of the definition – to be an MSC provider the accountant must be ‘in the business’ of promoting or facilitating companies etc. An accountant is not normally in this business – they are in the business of providing accountancy services. But is that enough? If you are paid for your work, are you not in business to provide that service, even if it is a small part of your income?

Pressure is growing on HMRC to provide more definitional assistance with this exemption. A key part of the problem is that, unlike lawyers, there is no UK standard marking one out as ‘an accountant’. The solution to this problem may lie as much with the professional bodies as with HMRC.

Anne Redston is chair of personal taxes at the Chartered Institute of Taxation and a visiting professor in Law at King’s College London