Working through composites or managed company providers has been an accepted practice in the construction industry for some contractors and subcontractors. However, the recent provisions in the Finance Bill have now effectively finished this practice and small one-man businesses are faced with a choice of PAYE via umbrella companies or agency payrolls or their own independent limited companies.

As is often the case, the new regulations are not definitive and consequently there have been varying, sometimes contradictory, views, leaving contractors unsure of what is effectively a 'safe haven'. This is set against a back drop where 'getting it wrong' could have significant financial implications.

In an effort to keep readers informed, we have kept in close contact with experts, including officials at the Treasury , and has sought to clarify some of these contentious points as they arose. We have also tried to report quickly as the legislation unfolded. An important fact in all of this is that as the changes have become known - and in some cases changed dramatically from first proposals - the new rules have made some of the earlier comments null and void.

This was compounded by unexpected changes from what the Government proposed in the Pre-Budget Report in December 2006, to what appeared in the publication of the Finance Bill in March 2007. It is the enormity of the changes and the short time scale from announcement to implementation which has lead to a large part of the confusion and conflicting views.

With so much historic information now out there I felt it appropriate, and probably useful, to try to consolidate the information and summarise the views in one place. In pulling this together I must stress that these are my views and should not be relied upon - nor do they constitute - advice.

I feel that it is almost impossible for anyone to have, or be able to give a definitive answer at this time, as the legislation is so broad. Also, it has yet to pass through the Parliamentary process where changes are possible in theory, if unlikely in practice. Furthermore, some of the issues may only be clarified with legal rulings at some point in the future. Nevertheless, I have taken into account advice of experts and the Treasury's implied and stated intentions.

Our sister site, Shout99, has published a free 'Guide to the MSC regulations'. It is also available to Hardhatter readers in download by clicking the attachment below. If you have any difficulties opening the document, please email me and I will forward you a copy.

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Susie Hughes
The Editor © Hardhatter 2006