HMRC attempts to clarify composites’ tax rules

The taxman has reiterated its view that legislation to stamp out tax-avoiding
managed service companies targets providers operating in a way ‘distinct from
professional accountancy services’.

Further information from HM Revenue
& Customs
followed details of MSCs attempting to circumvent the
new tax rules by presenting themselves as providers of accountancy services.

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

‘HMRC have confirmed their view that the legislation is not intended to, nor
does it, encompass service companies used by those genuinely in business on
their own account and the accountancy services provided to such companies,’ said
an HMRC spokesman.

‘The legislation addresses the discrete issue of those seeking to avoid
employed levels of tax and NICs by providing services though a company which is
promoted and facilitated in a way that is quite distinct from professional
accountancy services.’

The CioT’s Anne
said that further government guidance may be needed to
clarify what is meant by accountancy services.

Further reading:

Composites ‘posing as accountants’

Tax crackdown on MSCs boosts company

Composites face £1bn tax

Related reading

tax dictionary