Why we’re calling for a halt to MSC investigations

Letter writing - Hero image 01.png

An unexpected letter from HMRC is always a concern for contractors - could it be a tax investigation, or a wrongful IR35 status determination in the eyes of HMRC?

But the latest fear among contractors is receiving a letter citing Managed Service Company legislation.

Concerningly, this is the situation facing around 45 IPSE members and up to two-thousand other contractors who have been served eye-watering tax bills under MSC legislation.

At IPSE, we’re extremely worried that these investigations threaten any contractor that uses an accountant – that’s why we’re stepping up our campaigning efforts to halt these investigations until a full review of the legislation is carried out.

It cannot be right that HMRC targets the smallest businesses for engaging an accountant when the principal purpose of using an accountant is to be tax-compliant.

What is MSC legislation and why are HMRC applying it in these cases?

Introduced in 2007, MSC legislation aims to prevent tax avoidance by individuals paying third party ‘providers’ to create and manage bogus companies on their behalf. The rules were backed by industry and were effective at tackling the problem they were designed to tackle.

Until now, it was a scarcely used piece of legislation – other than in the case of Christianuyi v HMRC in 2019, where HMRC were successful in applying the legislation. The judgement was far wider-ranging in its application than many anticipated, and it is thought that HMRC’s success in this case has prompted it to broaden its approach.

HMRC is now using the legislation to target relationships between contractors and accountancy services providers – ones which, for the past 16 years, have been widely considered to be out of scope.

The MSC legislation even exempts the role of accountancy, but it appears that HMRC wishes to test the legal boundaries of this exemption.

In HMRC’s opinion, two accountancy services providers have breached MSC rules and therefore have been deemed a Managed Service Company Provider (MSCP) – a claim they deny but have no means of challenging.

What is a MSCP?


Employment income then becomes due on their clients’ earnings – with these clients themselves deemed Managed Service Companies (MSCs).

HMRC appears to have taken an indiscriminate approach to these inquiries, determining all the clients of these accountants to be MSCs before taking any individual circumstances into account.

What is an MSC?


Why we’re launching our campaign now

We’ve been supporting 45 members that have been caught up in this nightmare and it’s becoming increasingly clear that tribunals could be heard before the end of the year.

We believe it is essential that these investigations are halted until a review of the legislation – and of HMRC’s compliance strategy – is carried out, to ensure that what HMRC is doing is truly aligned with the legislation’s original aims.

We all know that the tax system is notoriously difficult to navigate. HMRC should not be increasing these challenges by pursuing those who seek expert advice from specialist accountants in their efforts to be tax-compliant businesses.

How you can help

This is where you come in. We’ve asked you to write to your MP before on issues such as IR35, and many of you have – thank you. It would help us enormously if you would do so again, as MPs are chiefly concerned with what their constituents are saying.

Join the campaign to halt ongoing MSC investigations and download our template letter.

Join the campaign

We will keep on pressing Ministers in the Treasury, backbench MPs and government officials about the need to halt these investigations. We will also continue to support our members with the help of our partners at Markel Tax.

For more information on what to do if you’re caught up in the MSC investigations, we’ve put together an MSC advice hub on our website. IPSE members will also be able to access a template appeal letter.

If you are not yet an IPSE member, please be advised that you won’t be able to access the tax investigation insurance if you join us after you receive the Regulation 80 determination notice.

Please let us know which MP you have contacted by emailing [email protected] so we can follow up with them.

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

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


IPSE fights for what is right for you and your business. We campaign to Government and industry leaders to build a better world so you can grow your business and be happy and healthy in your everyday life.

IPSE Campaign hub

Meet the author

Headshot original.png
Joshua Toovey

Senior Research and Policy Officer