Tag Archive | "MSC"

If you think a professional accountant is expensive, wait till you hire an amateur!


For some reason I’ve seen a whole raft of questions and complaints about that most retiring of professionals, our friend the humble accountant. What is more, the questions and complaints being raised tend to demonstrate why they need an accountant in the first place.

There are two basic themes, best summarised as “How much?!” and “My accountant won’t let me…”.

The “How much” brigade really amuse me. They usually ask for recommendations for a good accountant who only charges £50 a month. Well look, I used one of them when I started out in contracting, on the recommendation of someone who knows about these things and I was young (ok, youngish) and naïve. After a couple of years, when I’d learned what I was doing, I worked out he’d cost me a few thousand in unnecessary taxes, late filing penalties and generally weak advice. Rather more than I‘d paid him for his services, in fact. So I switched to one of the contractor specialist accountants who recovered that money over the next year or two by giving rather more appropriate advice and stayed with them ever since.

I’ve always said that a good accountant is free anyway. Let’s face it; I do two kinds of stuff. Some stuff is for clients and I get paid for doing it, at an hourly rate well above what my accountant charges. The other is stuff I want to do – well, OK, more usually stuff that She Who Must Be Obeyed wants me to do – and I don’t get paid for it (usually quite the opposite, in fact!). And doing accountancy beyond the bare minimum of logging what money went where does not fit into that category. So as far as I’m concerned the accountant is doing stuff I don’t want to do that has to be done, more accurately and far more cheaply than I could do it. So something of a no-brainer.

On the other hand, the members of the “Won’t let me” brigade are seriously deranged. In the last couple of days I’ve seen someone trying to claim spending £5500 on a single PC (including £2400 on two monitors) as a business expense, someone asking about charging his MBA course as a necessary business cost and someone asking about making his three year old a shareholder to save tax, then having a go at their accountant for asking questions. There are others – just wait a day or two and another one will be along…

OK, the first guy might have a point (he’s certainly got one hell of a home entertainment system …) but the other two not only don’t know the relevant laws, they’re actually complaining that their qualified, expert, paid advisor is telling them why it won’t work. Totally barking.

And just going back to costs again, I was challenged today on why I need to spend any more than £50 a month for a simple business model and can’t I see I’m being ripped off when his high street guy does all he needs doing. Fine, I replied, just ask him about a few contractor-related basics, such as what is the definition of a PSC, what’s IR35 and how it is assessed, what is the tax treatment of training to expand your skill set, how to correctly answer the questions on the P35 and why, and why he isn’t an MSC. He may well know all the answers, in which case well done him, but I know more than a few ACCAs who don’t.

As Red Adair said, “If you think a professional is expensive, wait till you hire an amateur”.

About the author: Alan Watts

Alan has worked in IT for most of the last 35 years, and first went freelance in 1996. He has been a PCG member from its start and has been spreading the message that freelancing is a professional career choice for many years. Alan also runs Malvolio’s Blog, a personal but highly informative take on the life of the modern freelance.

Alan Watts, Principal Consultant, LPW Computer Services

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Cartoon Man by TheNickster

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AWR – everyone ready for the end of the world?


It’s happening on Saturday and no, I don’t mean Scotland beating England by eight points. Although that would be fun for us Welsh…

No, Saturday is the day the eagerly anticipated Agency Workers Regulations come into force. And for such a significant event – and not just significant in our little world of contracting but in its potential impact on the UK economy and businesses – it all seems remarkably low key. And I find that both surprising and just a shade encouraging.

Of course it could be because everyone understands the new world and have prepared accordingly. Well not us Limited Company contractors of course, since we are out of scope so don’t have to do anything. This didn’t stop one poor soul asking questions about how he could persuade his agency that he was actually in scope. God knows why he thought that might be a good idea. Of course, he may simply be winding us all up – very occasionally that seems to happen on the internet, you know – and for his sake I hope that’s the case.

And, needless to say, there have been questions about does it really, really apply because of the ominous “genuinely in business” caveat the BIS or DBERR or whoever they are decided to add in for the fun of it. To which the answer is who knows, until it goes to court. Which I suspect it won’t, but you never know.

That reminds me of one of the better ideas I heard over the weekend. A group of us were pondering the work of the OTS (remember them? They’re still going you know) and how they could better focus their efforts. OK, so perhaps some of us should get out more, or perhaps drink less, but we found it worthy of discussion. The suggestion was made that the OTS could very usefully start with the various tax laws that have required a court case or two in order to figure out just what the hell the real rules are. Still, I digress…

So clearly the umbrellas and the agencies are well prepared, to the extent that I’ve heard of one agency that was trying to get its contractors to move to the right vehicle – PAYE through an agency, umbrella or limited Company – depending on their rates. Which is slightly deranged in one way but you can see the logic of it. So well done all.

But it does beg an interesting question. Why?

I mean, why is everyone so well prepared? Previous changes of similar magnitude – stopping MSCs, killing off some of the more imaginative offshore schemes, the Arctic Systems case, even IR35 itself – sort of burst upon a world that wasn’t really ready for them. That doesn’t seem to happen any more.

And that’s down to the wonderful Law of Unintended Consequences. In 1999, when the well-known failed tax-evader Ms Primarola introduced IR35, the aim was to punish us uppity freelancers by smacking us in the pocket. After all, given the recently released Freedom of Information answer that showed how pitifully ineffective IR35 has been financially, it clearly wasn’t done for the money. Or very well, come to that. But what it did do was galvanise a bunch of us uppity freelancers to fight back. And now, ten years on, HMG is not only listening to what we say, they are asking us what we think before they do it. Doesn’t mean they have the brains to listen, mind – else why do we have the AWR in its current foggy form – but at least we get the chance to publicise and explain things well ahead of their implementation. Which has to be a good thing.

So hopefully the AWR will do what it’s meant to do and protect the vulnerable and leave those who don’t need that level of care well alone. And we won’t get any more nasty surprises.

About the author: Alan Watts

Alan has worked in IT for most of the last 35 years, and first went freelance in 1996. He has been a PCG member from its start and has been spreading the message that freelancing is a professional career choice for many years. Alan also runs Malvolio’s Blog, a personal but highly informative take on the life of the modern freelance.

Alan Watts, Principal Consultant, LPW Computer Services

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Family Circus Redemption Project #31 by cutup

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I’m a contractor, not a managed service company…right?


Probably. The rather circular definition of a Managed Service Company is one that is provided by a Managed Service Provider. Since these were effectively outlawed in 2007, it is important to understand how they are defined.

MSCs were a way to operate an independent business with minimal involvement in its day-to-day running. The provider would set up a composite company in which you would have a shareholding usually in the form of a unique class of shares in your name. You would be paid in direct proportion to the work you did and hence the income you generated. The provider would handle all the billing, payment and taxation activities on your behalf.

However, HMRC decided, with what some might say was justification, that operating in such a way was more to do with saving tax and NICs than it was to do with running a business. They closed down MSCs by ensuring that they only paid their workers through conventional PAYE/NIC, not through dividends: in effect they became more akin to umbrella companies.

The difference between using an MSC and using an accountant to manage your affairs is therefore important. A Contractor Accountant is in fact defined specifically in the rules. They cannot be an MSC Provider as long as they do not do any of the following activities:

  • benefit financially on an ongoing basis from the provision of the services of the individual,
  • influence or control the provision of those services,
  • influence or control the way in which payments to the individual (or associates of the individual) are made,
  • influence or control the company’s finances or any of its activities, or
  • give or promote an undertaking to make good any tax loss.

So as long as you are the one whose name is on the chequebook and decide what cheques to sign, you cannot be an MSC.

© 2009 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Split Personality by Shaun Allen

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