What's the Managed Service Company Legislation about?

In April 2007 new legislation was introduced that affects all contractors that work via a Managed Limited Company (MSC). An MSC is a company formation in which the contractor benefits by paying an overall reduction in tax and often the ability to claim back business expenses. However the contractor has no control over the company, i.e. the company is “managed” by a third party.

• Managed Service Company – illegal
• Personal Service Company – legal
• Umbrella Company – not affected

This type of limited company (MSC) is illegal. Contractors can still have a limited company, can still benefit from reduced tax bills and can claim back expenses BUT they must also be in control of the company. The contractor must have a bank account, a qualified accountant and control over finances for the limited company to be legal. A company where the contractor has control is known as a Personal Service Company (PSC).

BITE does not offer MSC or PSC company solutions; however we can recommend qualified accounts that can. BITE help you find jobs and contracts, help develop your career and provide assistance where needed. All contractors need a legal solution in order to contract in the UK, we offer Umbrella Company Services and PAYE Employment, and are also happy to work with contractors with their own PSCs – provided they have been set up by accountants.