New tax legislation - Businesses could lose millions

UK businesses are set to lose millions and risk being tied up in intrusive and public tax investigations, if correct procedures are not put in place now to comply with new Managed Service Companies (MSCs) legislation, which is due for Royal Assent in the UK Parliament in August this year.

The legislation aims to wipe out MSCs, which have cost the UK economy millions in unpaid tax and NI contributions, and replace them with Personal Service Companies (PSCs), which will have to meet stringent criteria to operate legally.

Following the 2007 Budget, all payments received by individuals providing their services through MSCs are subject to PAYE and NI. All contractors who are found to be in breach of this legislation will face a gross bill to re-claim unpaid tax and NI, backdated to 6 April 2007, as well as a penalty fee and a black mark against their career.

Ethics and compliance specialists, Global Compliance Limited warn that soon, all third party organisations that employ contractors and MSCs will also be targeted, unless they take advice on how to comply now.

Director and founder of Global Compliance Limited, Sarah Morrissey said: ìAs of August 2007, new legislation will empower HM Revenue and Customs (HMRC) to claim unpaid NI contributions from contractors and MSCs, in addition to tax. From January 2008, in the instance that the debt cannot be recovered from the contractor or the MSC, HMRC will look to pass the debt on to their agency and then to their client. Recruitment agencies, the banking, finance, legal and IT sector and all businesses that employ contractors and MSCs, have only a few months to comply.

ìI strongly advise businesses to educate themselves on this legislation, as it could potentially cost a lot more than money. Credibility and reputation within the industry would be at stake if a company is seen to be associated with a MSC in any way or from, particularly in the case of recruitment agencies.

ìThese illegal tax operations have cost the UK economy a huge amount of money and in order to put a fast stop to them, HMRC will be seeking to make an example of all who are found in breach of the legislation. Unpleasant investigations are likely to be made public.î

Global Compliance Limited are running a series of seminars throughout the UK to educate department heads and HR, finance and compliance directors on the upcoming changes, so they can protect their businesses against this transfer of debt.

The seminars, to be held in July in London, Dublin, Birmingham, Bristol and Manchester, will be hosted by Industrial Relations 35 (IR35) and MSC specialists in tax and employment tribunals, David Smith and Matt Boddington; NRF President and Director of Compliance and Regulatory Affairs for Parc Group Ltd, Frank Collins; and accomplished presenter, event host and bid coach, Alan Elston.

For bookings or more information on the Global Compliance Limited MSC seminars phone 44 (0)203 008 2397 or email bookings@globalcompliancelimited.com