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HMRC internal manual

Employment Status Manual

Managed Service Companies (MSC): Avoidance of Double Taxation

The legislation requires a company meeting the definition of a MSC to treat all payments to workers as earnings from employment. If, despite the specific requirements of the legislation, a MSC chooses to make dividend payments to the worker, then subsequently treats these payments as deemed payments and performs a DEP calculation accordingly, a double taxation charge may arise. To avoid double taxation of amounts treated as deemed payments, the legislation provides for a claim for relief to be made. If relief is given for a particular dividend, the recipient does not need to show it in their ITSA return.