Managed Service Company Legislation
In Budget 2007 the UK Government legislated relating to Managed Service Companies (MSCs). This was the latest piece of legislation designed to restrict contractors in their potential to gain financial benefit through companies. It was commonplace before this time for contractors to receive payment via dividends from a company rather than as employment income under deduction of PAYE without the responsibilities of managing and running a company.
The legislation was written very broadly, meaning a worker providing services through a personal service company and receiving payments by way of dividends who is not fully in control of that company could be caught by the legislation.
The legislation also targets providers of these companies and the Government can transfer any debt through unpaid taxes to third parties, including MSC providers and parties that have actively encouraged and facilitated the use of these companies.
How does this affect you?
Anyone thinking about running their own limited company should ensure that they are fully aware of what is involved and the responsibility that they have to take. Most directors of companies would be expected to use the services of an accountant or legal adviser but it is important to ensure that these professionals are responding to the requests of the director, not running it or managing it on the director’s behalf. Additionally, they should not be involved in making payments to the director from his own company.
To summarise, before deciding to incorporate a limited company you should be fully aware of the responsibilities of a director. You should ensure that you open a business bank account for the company and you should be the signatory of it. You should be responsible for making all payments on behalf of the company and should be the controlling director of it. You should keep full records of all your company’s transactions and should sign any contracts that your company enters into.
What about AML?
AML is an independent company that employs you directly and does not use any company dividends to pay you. All income is employment related income and so neither you nor any other party engaged would be under any Managed Service Company risk. AML has been successfully audited by a leading industry specialist law firm and therefore have an independent opinion as to our Managed Service Company status.
