In the 2007 Budget the Government introduced legislation relating to Managed Service Companies (MSCs); the latest round of legislation designed to restrict workers gaining financial benefits of receiving payment via dividends from a company rather than as employment income by deduction of full PAYE, without having to actually manage and run a company.
The legislation targets both MSCs and providers of MSCs. It is now against the law to receive payments from a MSC that are greater than the amount that would be received if the worker was a direct employee of the client business receiving the services of the worker.
The Government also introduced transfer of debt provisions to sit alongside the MSC legislation, whereby the PAYE and National Insurance debts of MSCs that have not deducted the appropriate taxes from workers, which are irrecoverable from MSCs, can be transferred to third parties, including MSC providers and other parties that have actively encouraged and facilitated the use of MSCs.
As this legislation has been written so broadly, a worker who is providing services through a personal service company and receiving payments via company dividends but not fully in control of that company, with the company management being provided by another company or person, could be caught by this legislation and be subject to unpaid taxes.
A limited company is a legal structure and as such has to comply with numerous elements of legislation, not least the Companies Act and Tax and National insurance Acts. The legal obligations of both the company and its directors are complex and failing to fulfill those obligations can result in significant penalties from both Companies House and HMRC.
SmartPay is an independent company. We only undertake contracts to provide the services that our clients require. We provide our SmartPay employees, to provide the appropriate services to our clients, giving our clients complete peace of mind. We don’t provide limited companies, or any accountancy or company management services.
As an employee of SmartPay you do not have to worry about any of the risks and responsibilities surrounding being a director of a limited company, you do your work and we do all the rest whist enabling you to maximise your income potential with no nasty surprises.