It has defined the phrase 'managed service companies' (MSC) as two distinct categories. The composite company with multiple workers and the managed personal service company, with only one worker.

The report also gives examples of how MSCs advertise their schemes on their websites by highlighting higher income by avoiding tax and NICs and promoting that the individual is not involved in the running of the company.

The Government's intention is to introduce legislation coming into effect April 2007 whereby 'income received by workers in MSCs in relation to services provided through the MSC will be subject to employed levels of tax and NICs, with the MSC obliged to operate Pay As You Earn (PAYE) and deduct tax and Class 1 NICs on that income - and the rules for tax relief for travel expenses will be the same as for other employed workers.'

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Susie Hughes
The Editor © Hardhatter 2006