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HMRC internal manual

Employment Status Manual

HM Revenue & Customs
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Managed Service Companies (MSC): Meaning of Associate

Associates of MSC Providers

Relevance in terms of being involved

The definition of involved in section 61B(2) (see ESM3520) applies where either a MSC Provider, or an associate, undertakes any of the activities set out in the section.

The reference to associate is very deliberate in order that the legislation cannot be circumvented by a MSC Provider arranging for a third party to undertake activities previously untaken by the MSC Provider personally.

For the purpose of Section 61B (2), to be an associate of a MSC Provider a person must act in concert with that provider for the purpose of securing that the individual’s services are provided by a company. A person acting in concert with a MSC Provider for any other reason will not be an associate for the purpose of Section 61B (2).


Not an associate:

  • An Insurance company or broker, as part of a wider business of providing insurance, providing insurance to the MSC Provider’s clients
  • An Employment Business or Agency, as part of its normal wider business of placing work seekers with end clients, places the MSC Provider’s clients with end clients
  • A Payroll Bureaux which, as part of its wider business of operating payrolls for clients, operates payrolls for a MSC Provider’s clients.

An associate:

  • An Employment Business or Agency demonstrably in business solely or mainly to place the client companies of a MSC Provider with end clients
  • A bookkeeping service demonstrably in business to provide services solely or mainly to the client companies of a MSC Provider

Relevance in terms of transfers of debts

If a person is an associate of a MSC Provider, that also has relevance in terms of the debt transfer provisions. An associate comes within the second category of transferees (See ESM3625 by virtue of section 688A (2) (d).

Associates will therefore be considered for transfer of debts at the same time as MSC Providers are considered.

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Associates of persons other than MSC Providers

Associate of the worker

The legislation is structured in such a way that if an associate of a worker receives a payment in respect of the services of the worker, it is treated as if the worker had received the payment (see sections 61B(1)(b), 61B(1)(c) and 61D(1)(b)).

For the purpose of associate of a worker, ‘associate’ means:

  • a member of the individuals family or household; or
  • a relative of the individual; or
  • a partner of the individual, or
  • the trustee of any settlement in relation to which the individual; or
  • a relative of the individual or member of the individual’s family (living or dead), is or was a settler.

Note: ‘Relative’ means ancestor, lineal descendant, brother, or sister.

For the purposes of an individual’s associate:

  • a man and woman living together as husband and wife are treated as if they were married to each other, and
  • two persons of the same sex living together as if they were civil partners of each other are treated as if they were civil partners of each other.

Associate of the worker: transfer of debts

Note that for the purposes of transfer of debts, HMRC cannot transfer a MSC’s debt to the associate of a worker. This is specifically precluded by section 688A(2)(d) (see also section 3.1).

Associates of other persons

Associates of other persons has relevance in terms of transfer of debt. As with associates of workers, HMRC cannot transfer a MSC’s debt to associates of other individuals (for example, the wife of the MSC Provider’s Director) (see ESM3625).

Associate in relation to a company means a person connected with the company.

A company is connected with another company if:

  • the same person has control of both; or
  • a person has control of one and persons connected with him; or
  • he and persons connected with him have control of the other; or
  • a group of two or more persons has control of each company, and the groups either consist of the same persons or could be regarded as consisting of the same persons by treating a member of either group as replaced by a person with whom he is connected.

A company is connected with another person if:

  • that person has control of it or if that person and persons connected with him together have control of it.

Any two or more persons acting together to secure or exercise control of a company shall be treated in relation to that company as connected with one another and with any person acting on the directions of any of them to secure or exercise control of the company.

Associates in relation to a partnership means any associate of a member of the partnership. Where the partners are individuals, the associates of those partners are as under ‘Associate of the worker’. Where a partner in a partnership is a company the associates are those as detailed by point 1, 2, and 3 under the heading ‘Associates of other persons’.

See ESM3625 for more information on transfer of debts.