What’s happening with the Managed Service Company tax investigations?

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We’re now a little over two years since contractors were first sent determination notices for life-changing amounts of unpaid income tax and NI from HMRC. Yet, we still await any sort of resolution (although test cases could be heard before the end of the year – more on that later).

For the 2,000 contractors (around 50 of which are IPSE members) caught up in this, the snail pace progress of these investigations is only adding to the anxiousness of the situation. That’s why IPSE ramped up our campaigning efforts last year, in a bid to raise awareness of the devastating impact these investigations are having.

I’m pleased to say these efforts our now being noticed at the highest levels of government but we continue to raise the unfairness of HMRC’s activity in this area at every opportunity.

With that in mind, I wanted to provide an update on the progress of these investigations and our conversations, remind us all why HMRC are now pursuing contractors with this legislation and consider the ramifications for the entire sector.

What is Managed Service Company legislation?

For those unfamiliar with these Managed Service Company (MSC) investigations, the legislation has been in place since 2007. It sought to clamp down on composite companies –  where a group of shareholders operate the company as a service provider and benefit from the way in which payments are made; usually avoiding employment taxes on payments from their clients.

The legislation was largely backed by industry and very effective in tackling exactly what it had set out to do so.

It wasn’t until the case of Christianuyi v HMRC that HMRC had shown any real interest in using this legislation for any other purpose. However, the wide-ranging nature of this ruling has seemingly given HMRC the impetus to now go further.

For more information on the case, we put together a detailed write-up of the ruling and the potential impact for future investigations back in 2022.

Despite the MSC legislation including a specific exemption for accountancy providers, the current investigations into two specialist accountancy services providers – Boox and Churchill Knight – appear to all intents and purposes to be testing the scope of this exemption.

And due to the way the legislation has been drawn up, it is the clients of these accountants – the contractors – that are issued with the demand for unpaid income tax and NI totalling thousands of pounds.

Can we expect test cases in the near future?

HMRC has now started the process of selecting the very first test cases on this and a few IPSE members are currently going through this lengthy process of determining whether their case is one that HMRC wants to try.

It’s important to add that these IPSE members are benefitting from IPSE’s £100k Tax Investigation Cover and around the clock support in dealing with HMRC from both IPSE and our tax partners, Markel.

We have also been running regular Q&A sessions with all IPSE’s affected members and will continue to support all our members until we finally get an outcome on this.

Ramifications for the entire sector

At IPSE, we are acutely aware that any contractor using a specialist accountancy services provider could potentially get caught up in future investigations.

Were HMRC to be successful in these forthcoming test cases, they could seek to go after further specialist accountancy services providers. And unlike IR35 – where HMRC goes after contractors one-by-one, these MSC investigations seemingly makes all of their clients – the contractors – liable.

IPSE’s campaigning on behalf of members

Alongside our support of members, we’ve also been actively campaigning for a halt to these investigations until a full review of the legislation is carried out.

Reviewing the legislation was one of IPSE’s key asks in our Spring Budget submission and I have simultaneously been raising this issue with the Small Business Minister, Kevin Hollinrake, in our regular SME council meetings.

Similalrly, we’ve previously launched a letter-writing campaign to raise awareness amongst MPs and this seems to have had an impact as the Financial Secretary was already well-aware of these investigations and our concerns when our CEO, Derek Cribb, raised this issue with him last week at Downing Street.

We’re pressing for a follow-up meeting with the Financial Secretary and we’ll be sure to keep members updated with any progress of these conversations.

We still need your help

It cannot be right that the smallest businesses in this country are targeted for simply engaging an accountant when navigating the notoriously complex tax system.

This is where you come in. Many of you have already written to your MP on MSC and this has facilitated some very illuminating meetings between IPSE and MPs.

If you haven't yet contacted your MP, it would help us enormously if you could do so now as MPs are chiefly concerned with what their constituents are saying. We've even put together a template letter with some of the key arguments.

Once you have written to your MP, if you could then let us know which MP you have contacted at [email protected], we can then also follow-up with them.

Write to your MP


MSC legislation guide

IPSE is supporting members affected by Managed Service Company investigations. Here, we outline the scope of the legislation, actions that can be taken for those affected and what this could mean for other accountancy providers and their company clients that could be caught up in this.

Read the guide

MSC campaign hub

IPSE is campaigning for ongoing investigations under Managed Service Company legislation to be brought to a halt. You can support the campaign by writing to your MP today.

Join the campaign


Need more help? Self-employment often means having to navigate lots of different websites with no clear source of truth. As the only not-for profit focused on self-employment, IPSE provides impartial and relevant advice on the topics that matter to you.

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Meet the author

Andy Chamberlain

Director of Policy and External Affairs