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.

Budget Note – MSC Legislation Changes
Lawspeed Meets with HMRC