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HMRC internal manual

Employment Status Manual

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HM Revenue & Customs
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Managed Service Companies (MSC): MSC Providers

To be a MSC Provider, a person must be carrying on a business of promoting or facilitating the use of companies to provide the services of individuals.

Meaning of “promotion”

In this context, promotion does not mean a person who promotes their business (whatever that business might be), rather it means the promotion of a certain type of product, namely companies to provide the services of individuals. Promotion takes its general usage meaning and includes, amongst other things, such activities as marketing, encouraging, initiating, etc.

Meaning of “facilitation”

In this context, facilitation takes its ordinary meaning: amongst other things, helping, making easier, enabling etc.

Who is and who is not a MSC Provider

The legislation provides a specific exemption for persons being MSC Providers (involved with a company) merely by virtue of providing legal or accountant services in a professional capacity. This specific exemption applies only to persons professionally qualified (or training for a professional qualification) regulated by a regulatory body.

But simply because a person is not exempt merely by virtue of providing legal or accountancy services in a professional capacity, does not mean that they are a MSC Provider. Persons who promote or facilitate companies generally, as opposed to companies specifically to provide the services of individuals, are not MSC Providers.

The Financial Secretary to the Treasury, John Healey, said in Parliament on 15 May 2007: “The first element that must be satisfied is that a person is carrying on a business of promoting or facilitating companies to provide the services of individuals, not a business to promote or facilitate companies generally. For that reason, those promoting or facilitating companies generally — for example, company formation agents — are not MSC providers. The same would be true of training providers and a number of companies that may provide advice.”

An accountancy/tax advisor, whether or not professionally qualified, who provides advice to clients who are service companies is not a MSC Provider merely by virtue of their client base. The test is whether a person is carrying on a business (or a discernable part of their business) of promoting or facilitating the use of companies to provide the services of individuals.

Examples:

The following are not a MSC Provider by virtue of the activity described:

  • A firm of accountants carrying on a business of being accountants (irrespective of the percentage of the client base which is individuals operating through service companies)
  • A Tax Advisor carrying on the business of being a Tax Advisor generally
  • A Company Formation Agent
  • A Chartered Secretary
  • An Employment Business/Agency undertaking its core business of placing work seekers (including those operating through companies) with end clients
  • Service providers providing services to companies generally, for example insurance companies, payroll bureaux etc.
  • A Trade Association operating in the service sector

The following are a MSC Provider:

  • A Service Provider carrying on a business specifically of marketing and/or providing corporate solutions and services to individuals providing their services to end clients
  • A firm of accountants carrying on a discernable part of their business specifically to market and/or provide corporate solutions and services to individuals providing their services to end clients. (In this case the firm would only be a MSC Provider in respect of that discernable part of the business.)
  • A business which terms itself a Tax Advisor, service provider, or whatever but which specifically markets and/or markets corporate solutions and services to individuals providing their services to individuals.

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Back Office Service Providers

The term “Back Office Service Provider” is applied to a number of different types of operations. Whether or not such providers are MSC Providers, or possibly associates of MSC Providers, will depend on the precise nature of their business.

A person who terms themselves a “Back Office Service Provider” and who is carrying on a business of, in addition to providing a range of accounting/bookkeeping services, providing structures (partnerships or bodies corporate) through which workers provide their services, is likely to be a MSC Provider because such a business model indicates that they are in fact promoting or facilitating the use of companies to provide the services of individuals. If this is the case, the person must consider whether their business model constitutes being involved with their clients (see ESM3520).

A Back Office Service Provider who:

  • Provides accounting/bookkeeping services exclusively to clients in the service company sector, is a MSC Provider because they are carrying on a business of facilitating the use of companies to provide the services of individuals
  • Merely provides accounting/bookkeeping services to clients generally, and not exclusively in the service company sector, is not a MSC Provider
  • Merely provides accounting/bookkeeping services to Employment Businesses or Agencies carrying on their core business of placing work seekers with end clients, is not a MSC Provider; or
  • Acts in concert with a MSC Provider for the purposes of securing that an individual’s services are provided by a company, is an associate of a MSC Provider.