Your accountancy services provider may contact you with the information that they have been deemed by HMRC as a Managed Service Company Provider (MSCP). Your company will also likely receive a Notice of Regulation 80 determination letter from HMRC.

If you are unsure if your company has been affected, you can contact your accountancy services provider to check if they have been determined as a MSCP. Alternatively, if you have been notified by your provider but yet to receive a determination letter, you can write to HMRC to check.

A Notice of Regulation 80 determination is commonly used by HMRC to inform that unpaid employment income tax and National Insurance is due for a certain tax year. Under the Regulation 80 rules, determinations can be issued within four years of the end of the affected tax year.

In the case of MSC legislation, a Regulation 80 notice of determination letter would be sent to your company to inform you that your accountancy services provider has been determined as a MSCP and that your company is now deemed a MSC. HMRC would then outline their determination of unpaid PAYE income tax and National Insurance due by your company for the affected tax year.

IPSE will help you with your appeal and IPSE Plus members will also benefit from the tax investigations service if HMRC request documents under HMRC’s information gathering powers from your company prior to an assessment being raised.

Appeal

On receipt of a determination notice, we strongly advise all IPSE members to appeal within the 30 day deadline. We can provide you with a template appeals letter or advise you on what to put in your appeal letter. Your accountant may also provide you with an appeal letter. The letter should clearly state that you, on behalf of your company, appeal the determination, provide an outline of the grounds for appeal and requested that the tax charge be postponed.

Stay in touch with IPSE

Members can contact [email protected] on receipt of a determination letter and we can support you with advice, regular Q&A sessions with all affected members and information about how your membership will protect you from the next steps of HMRC’s enquires. In addition, IPSE’s tax and legal helplines can be used by members looking for legal support by logging in to IPSE’s website here.

Insurance

In addition to the insurance position for all IPSE members, IPSE Plus members will also benefit from the tax investigations service if HMRC request documents under HMRC’s information gathering powers from your company prior to an assessment being raised.

Join IPSE today to ensure to take the right steps in any HMRC investigation.

You will be accepting the liability for the unpaid employment income tax and National Insurance specified in the determination notice if you do not appeal within 30 days of the date HMRC sent you the determination notice.

HMRC can still consider a late appeal, subject to a good reason being provided for the delay in appealing.  You will need to contact HMRC to request permission to make a late appeal.

IPSE strongly recommends that you appeal within the 30 day notice period otherwise you will be accepting the liability and could risk HMRC not granting a late appeal.

Yes – once HMRC have acknowledged receipt of the appeal, you can amend the contents of the appeal letter.

The important step is to appeal the determination notice within the 30 day notice period. Thereafter you can then add information to your appeal letter or alter the reasons behind the appeal at any point without being penalised by HMRC.

Yes – unfortunately interest will be applied to the determination of unpaid employment income tax and National Insurance provided on your Regulation 80 notice of determination letter, even after appealing.

You can find the current interest rates that HMRC would apply here.

The only way to mitigate the interest payments would be to pay the tax, which is not what we would advise. In the event that the final opinion from HMRC is delayed, you may be able to apply to the Interest Rate Review Unit to argue that interest should not apply.

If you have received acknowledgement of your appeal from HMRC, we recommend that you begin the process of collecting all correspondence with your accountancy services provider including contracts and any other evidence that may support your case. You should gather any material that can show that you had control over your company’s finances and the way it made payments and any evidence that shows deviation from the accountancy services provider and their recommended actions.

You should be looking for any evidence within correspondence, actions or in your contract with the accountancy services provider that demonstrates the following:

• Independence from the accountancy services provider (e.g. they are not the company secretary of your company or have any other involvement and just provide financial advice)
• Detachment from their processes (e.g. not using their portal to upload documents)
• Divergence from their recommendations (e.g. choosing to pay yourself in an alternative way to their recommendation)

When it comes to considering corporation tax which has been overpaid because of assessments which become due, there is no specific “offset” mechanism.  While the case is under appeal, HMRC will not consider the matter, as potentially there might not be any need to “offset” any tax – the assessments might for example end up being vacated if the MSC legislation is not deemed to apply.

As the period in question is not a recent accounting period then in the event an appeal is lost and the liability becomes due effectively the new MSC liability applies for that period, a period you have already paid Corporation Tax on.  You can apply to HMRC at this point to ask that corporation tax already paid for that period is taken into account to reduce the newly crystallised MSC liability.

Under the legislation, your company’s status as an MSC is based on its relationship with the provider – if that relationship ends, your company would no longer be considered by HMRC to be an MSC from that point onwards.

In the event that HMRC is successful in demonstrating that your accountant was an MSCP, the fact that you ended your association with them during the tax year could be relevant when it comes to calculating your final tax bill. However, HMRC could still determine that your company was an MSC up until that point, meaning that earnings generated by your company within that period would fall within scope of the legislation.

No – if you have applied for your company to be dissolved and you have had it confirmed by HMRC that your company has been officially struck off from the Companies Register, HMRC cannot come after you for unpaid employment income tax and National Insurance under the MSC legislation.

However, limited companies in the process of being dissolved can still be contacted by HMRC for unpaid employment income tax and National Insurance.

IPSE can’t give specific advice on whether you should leave or stay with your current accountancy services provider. However, we do strongly recommend that your accountancy provider has a good grasp of the MSC legislation and understands how to avoid being “involved with” your company as according to the legislation.

The current accountancy providers under investigation from HMRC stress that they have not acted in a way that differs from other accountancy providers and have passed checks from external bodies on whether they comply with the MSC legislation.

More importantly, unlike a high-street accountant, a specialist accountancy services provider can also benefit your limited company with expert knowledge and advice on your tax affairs, business law and opportunities for growth.