The following Tax guidance note provides comprehensive and up to date legal information covering:
Many individual workers supply their services to clients, not directly as a self-employed person, but via an intermediary (often a personal service company (PSC)). This arrangement can potentially have tax and National Insurance contributions (NICs) advantages—for more details, see Practice Note: Personal service companies—the key benefits and key tax considerations.
Where a PSC is owned by the individual worker, it is likely to come within the scope of the anti-avoidance intermediaries legislation, commonly known as 'IR35' (after the reference number of the HMRC Press Release announcing the rules in Budget 1999). For more details, see Practice Note: The intermediaries legislation—IR35.
In the years following the introduction of that legislation, a number of providers began to offer PSCs to a wide range of individuals. These providers usually supplied the workers under a contract containing clauses designed to avoid IR35, while still delivering many of the benefits of a PSC.
The providers also dealt with the more onerous administrative aspects of running a company, such as calculating PAYE, profits and dividends, and dealing with both Companies House and HMRC. Companies with external providers who supplied these all-encompassing services became known as 'managed service companies' (MSCs), in contrast to PSCs, where it is the individual who is entirely responsible for running the business.
To counter what HMRC saw as unacceptable avoidance
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