MSC risk is real

Now that all interested parties have lodged responses to HM Treasury within the current expenses consultation, it is worth getting back to basics.

The MSC legislation is not yesterdayís story, it is very current. Earlier this year HMRC appointed a specialist team to follow up the MSC legislation. We can say with authority that investigations have already started as we are dealing with the investigators on behalf of a targeted client. To say that our client is concerned would be an understatement, not the least at the amount of work required, and therefore the time and cost, to deal with the investigation.

This leads me once again to warn of the dangers of using ìumbrella companiesî that do not solely provide an employment umbrella solution. Companies providing a range different disciplines (e.g. personal service company services, company formation, IR35 services, accountancy advice, employment umbrella, CIS umbrella) are often branded under the same trading name and it can therefore be confusing for agencies as to which company or service it is taking on.

It is easy to be taken in by a sales pitch which assures the agency that the workers recommended to the ìumbrellaî will only be offered an employment solution. The danger is that the organisation you think is safe switches your worker from an employment model to an alternative, or perhaps does not fully pay by way of employment income only. A reminder here. An employment umbrella, which pays the worker only by way of employment income, does not represent any risk at all under the MSC legislation. Any other model offers potential risk. That risk is not alleviated because the model is run by certified or chartered accountants as there is no general exclusion in that regard. A business can be an MSC Provider (and therefore the workerís company an MSC) whether or not it is run by accountants. This last point is often misunderstood.

Is there safety for agencies to use umbrella companies that are members of trade organisations? The implication of being a member of a trade body would be that just by being a member the company is ìcompliantî. Nothing in fact could be further from the truth when it comes to exposure to MSC risk. Apart from the fact that the assertion ìwe are compliantî means nothing – compliant with what and tested against what and by whom – none of the trade bodies, with one exception, assert that their members only offer an employment model. So, subject to what I say below, membership of such a trade body does not necessarily help the risk averse agency.

The government is already engaged upon considering how to stop abuse of the tax rules. Do not allow risk of third party claims against your agency to creep in by relying on the assurances of a company that wants to provide services to you. Even if a company tells you that it is certified and there is an insurance policy to back it up you should check out the statements – who certified the company, does the auditor have a conflict of interest, have you seen a copy of the insurance policy?

The exception I mention is the AEMC, a non profit making company and the only pure employment umbrella trade association. To be a member, the umbrella company must only provide an employment model, be audited to establish that fact and must sign up to and adhere to a transparent set of rules and code of conduct which all can see. Breach the rules and membership can be lost with bad commercial consequences for the member. The AEMC logo can only be used by the actual named umbrella company, thereby avoiding the confusion that comes with use of a wider ranging and risk prone trading brand. Use of an AEMC Member therefore offers to an agency the very best chance of avoiding MSC risk. For this reason and the fact that we undertake the auditing ourselves, Lawspeed recommends AEMC members to all our agency clients. The statement ìonly use an employment only umbrella certified by the AEMCî is one we happily endorse.

Adrian Marlowe, Managing Director, Lawspeed Limited