Managed service companies FAQ
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.Example of a Regulation 80 determination letter
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.
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.
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.
In the event HMRC determine, in their final determination, that the MSC legislation does apply to your company, an independent review affords you the opportunity to state your case to an HMRC officer who has not previously been involved in the case, and to provide factual evidence and detailed reasoning as to why the legislation does not apply.
Our recommendation is that when lodging your appeal against your Regulation 80 determination, you should also include notification to HMRC that you wish to exercise your statutory right to Independent Review once HMRC has issued its final conclusion of the matter.
However, we are aware that HMRC have already responded to some applications for an independent appeal with notification that an officer has been appointed to review the case immediately. It is therefore important to stress that you wish for the independent review to be carried out after HMRC have to their final conclusion as part of the appeal. In the event that HMRC appoint a case officer to begin process of an independent review prior to coming to their final determination, please contact [email protected] and we can provide you with a further template letter for delaying this process until HMRC have reached their final conclusion.
Alternatively, if HMRC’s final determination is that your company is an MSC, you could request an independent review at this stage if you haven’t done so already – but you will only have 30 days to create your submission. By requesting the review at the appeal stage, you shift the time pressure to HMRC, who will have 45 days to appoint an officer to review your case.
Ultimately, it relieves pressure from you to act once the review is concluded, and signals to HMRC that you believe from the outset that you have the evidence to defend your case.
Yes - as long as you have appealed your determination notice within the 30 day notice period, you can ask for an independent review at any stage of the review. However, our recommendation is that you request your right to an independent review as part of your initial appeal.
If you believe that you can already provide specific evidence for why your company cannot be considered a MSC for the affected tax year (e.g. you were not that with the accountancy services provider for that tax year), you can include this within your appeal letter and as reasoning for why your case should be considered independently.
It is important to note, however, that the appeals letter just merely appeals the determination at this stage and more specific information around working arrangements and the ‘involvement’ of the MSCP will be covered later on in HMRC’s enquires.
IPSE members can consult IPSE’s tax and legal helplines or email [email protected] should they wish to seek advice and guidance on amending their appeal letter with details of their specific case.
If HMRC vacates their review of my accountancy services provider, how does this affect my tax liability?
If you are still waiting for an acknowledgement after multiple weeks and are concerned that your appeal was not received by HMRC, or you have received further correspondence from HMRC indicating that your appeal was not lodged, please contact [email protected] for support.
If you haven’t yet submitted your appeal, consider asking your tax adviser, legal counsel or IPSE’s policy team if you can copy them into your email and ask them to alert you if they spot any issues with your submission. If mailing by post, using a recorded delivery can provide reassurance against the risk of an appeal being lost in the post.
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.
I stopped using my accountancy services provider part way through the tax year HMRC are reviewing – how does this affect my case?
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.
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