Legislative News
Composite Companies that pay dividend income to Contractors have been abolished.
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| With the new legislation coming into force on the 6th April 2007, it will be illegal to provide services via a “Composite Company”,
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| When did this ruling come into effect?
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| 6th April 2007
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Why has this legislation been introduced?
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| Treasury are say that to receive the tax advantages of being a legal corporate form you need to be self-employed, i.e. pass the IR35 test and take on the operational, legal and financial responsibilities of being in business via a Limited Company.
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What is an MSC? |
An MSC is in the business of providing persons either directly or indirectly to other persons under a Managed Services Company Scheme.
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A Managed Service Company Scheme is a “scheme” or “arrangement” under which persons supplied either directly or indirectly to other persons. The greater part of the consideration for the provision of the services of an individual is paid either directly or indirectly to that individual, and where there is a scheme provider that scheme provider, or their associates, exercise control over the general management and finances of the company or partnership.
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| Does the MSC (Managed Service Company) legislation apply to you?
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No, if you are working through an Umbrella or other structure where all your income is taxed under PAYE. Maybe, if you are providing your services through a Personal Service Company (PSC) and you receive part of your income as a dividend.
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As a quick check, if you can answer “yes” to all of the following questions, then you are likely to be working through a PSC and therefore unaffected by the new legislation:
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Are you the director of your company?
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Do you have a company bank account of which you are the signatory?
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Do you control the way in which amounts are drawn from your company bank account and do you determine the amounts and the timing of any drawings
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Are you in control of all your company’s contractual affairs (e.g. defining elements of the contract between yourself and your Agency)?
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If the answer to any of the above questions is “no” your company may be an MSC and you should take further advice. Please contact us for information.
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