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Government clamping down on Manage Service Companies

New research has revealed that the government is taking steps to put an end to using Managed Service Company legislation as a method of tax avoidance.

A Freedom of Information request submitted to Her Majesty’s Revenue & Customs has discovered that new plans are in the work to allow the government to recover National Insurance and tax contributions, and some measures have already been instituted to increase the number of tax avoidance investigations. Three times the number of investigations into Managed Service Companies that may be engaging in tax avoidance have occurred in just a few short months, the released official documents recount, with the number of tax avoidance arrangement enquiries made in regards to Managed Service Companies has increased to 860, a massive jump from the figure of 216 enquiries just seven short months ago.

It was also revealed that since April 2011, there have been a sum of 142 debt transfer notices issued. This could lead to serious repercussions in the future for any recruitment firms that deal with managed service providers and could have a chilling effect on the use of such service companies in the future.

The legislation , which calls for a definition of ‘Managed Service Company’ as any contractor organisation that pays its workers higher than a permanent employee would earn in the same position, could lead to recruiters being found responsible for National Insurance and income tax payments that were originally avoided by any Managed Service Company they use.

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