8th February 2007 MSC consultation phase 2 - Government releases third party debt provisions.

Following the consultation announced on 6th December 2006 “Tackling Managed Service Companies”, the government has now published its first draft of the threatened third party liability provisions, making third parties liable for the tax debts of an MSC.

This again is within a consultation to which responses are required by 30th April.  The consultation is limited only to whether the draft legislation is wide enough to achieve the objective of stopping tax avoidance through scheme providers, and whether third parties, for example agencies and end users, could be held liable on any basis other than that they knew or could reasonably have been expected to know of the arrangement.

However it is the stated intention that the new laws in final form will apply to any tax debt incurred from 6th April 2007. Accordingly whilst some may be tempted to consider that there is time after 6th April 2007 to change their arrangements, there is in fact no time if potential tax liability is to be avoided.

On first review the rules provide liability in the following order. First for the MSC to be liable, then any scheme provider, and then any agency or end user, or any “person who directly or indirectly has encouraged, facilitated or otherwise been involved in the provision by the MSC of the services of the individual”.

Further updates to be provided to AgencyZone Subscribers.

IMPORTANT SEMINAR - On 3rd April 2007 we shall be holding a seminar on the issues that arise - "AVOIDING LIABILITY FOR MSC CONTRACTOR TAX".

DOWNLOAD THE CONSULTATION DOCUMENTS:

1. Latest Download 23/03/07 - Chapter 9 ITEPA - Meaning of "Managed Service Company"
– Download the Document

2. Summary of Consultation Responses
– Download the Document

3. Tackling Managed Service Companies
– Download the Consultation

4. Transfer of MSC Debts
– Download the Consultation