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HMRC internal manual

Decisions and appeals for National Insurance Contributions and Statutory Payments

HM Revenue & Customs
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Decision types: Managed service companies - deeming employed earner’s employment, earnings and secondary contributor

The Social Security Contributions (Managed Service Companies) Regulations 2007 (SI 2007 No 2070)

These regulations make provision about payments and benefits received by workers whose services are made available to clients by means of managed service companies (MSCs). Specifically, where certain conditions apply, the regulations treat

  • the MSC as making to the worker, a payment or benefit which is treated as earnings from an employed earner’s employment, and
  • the worker as receiving a payment or benefit which is treated as earnings from an employed earner’s employment, and
  • the worker, in relation to the payments or benefits treated as earnings, as employed in employed earner’s employment by the MSC, and
  • treat the MSC as the secondary contributor.

These provisions only apply if

  • the services of an individual (the worker) are provided (directly or indirectly) by a managed service company (the MSC),
  • the worker, or an associate of the worker, receives (from any person) a payment or benefit which can reasonably be taken to be in respect of the services, and
  • the payment or benefit is not earnings derived from an employed earner’s employment of the worker with the MSC.

If the provisions apply Class 1 National Insurance contributions (NICs) are due on the amounts treated as earnings and the person liable to pay is the MSC. If the provisions apply but the MSC has not complied with the legislation, a notice of decision must be issued to

  • show that the above provisions apply;
  • include a Class 1 NIC liability and paid decision.

The decision must be issued at the same time that an income tax determination is issued under regulation 80 of the Income Tax (Pay As You Earn) Regulations 2003 (SI 2003 No 2682).

For wording of such decisions see DANSP40700.