The Association of Independent Professionals and the Self-Employed (IPSE) has said that HM Revenue and Customs (HMRC) is issuing “misleading” tax bills to contractors that engage firms that the revenue service has determined to be a Managed Service Company Provider (MSCP).
The IPSE has said it is aware of “at least two accountancy services providers” which have recently become the subjects of HMRC investigations under legislation covering Managed Service Companies (MSC), with the investigations said to relate to the 2017-18 tax year.
The implications of these investigations are that, if a firm providing services to contractors is determined to be an MSCP, clients may subsequently be deemed to be MSCs. If this is the case, MSC earnings from relevant tax years will be subject to income tax and National Insurance contributions.
As reported last week, one of these investigations relates to accountancy firm Churchill Knight & Associates, with several customers of the company having been issued unexpected income tax bills of up to £50,000 from HMRC. The other firm being investigated is reportedly fellow accountant Boox.
The IPSE says that legal limits mean that HMRC must inform contractors that they have determined their company was an MSC by April 5 2022 in order to recover tax for the 2017-18 tax year. If contractors are not contacted by this date, HMRC loses its right to pursue MSC claims.
According to the IPSE, examples it has seen of contractor tax bills relating to MSC determinations are “highly questionable”. It asserts that: “HMRC has rushed out these notices to meet the 5 April deadline and hasn’t properly calculated the tax that would be owed, if indeed it is able to establish that the accountant is an MSCP.”
The IPSE has said its “strong recommendation” is that if contractors are contacted by HMRC to inform them that their company is an MSC, they should appeal the decision immediately. The association adds that it will support its members in determining the correct amount of tax they owe, if their accountant is determined to be an MSCP and is unable to successfully appeal against the determination.
