Composites 'posing as accountants'

Managed service companies have attempted to circumvent new tax rules by
claiming that they are accountants.

Details of managed service companies, also known as composites, attempting to
exploit a loophole in new tax rules emerged as confusion surrounded the market
over the effect of new legislation to curb contractors avoiding tax and NI
liabilities.

The use of managed service companies, where contractors are paid in dividends
by the company to avoid a proportion of tax and NI liabilities, will be ended
when the finance bill receives royal assent.

Accountancy firms providing services to contractors are exempt from the new
rules. But some MSCs are badging themselves as accountants if they have an
accountant employed or the company is a member of an accountancy body.

But KPMG tax director John Chaplin said it was ‘naïve’ to think the Treasury
would allow such a loophole.

‘This is the end for companies specialising in promoting and facilitating tax
advantageous services to one man limited companies, regardless of whether they
are badged as “accountants” or not,’ said Chaplin.

‘Contractors should disregard claims made by some specialist providers of
services to one man limited companies that membership of a professional
accounting body exempts them from this legislation,’ said Matthew Brown, MD of
managed service and umbrella company provider Giant Group.

‘All specialist providers of services to one man limited companies are caught
without exceptions. Contractors’ only option is an umbrella company.’

More to follow.

Further reading:

Tax crackdown on MSCs boosts company
registrations

Third parties to carry can for contractor
taxes