Income Tax (Earnings and Pensions) Act 2003 section 61B

Meaning of "managed service company"

Section 61B defines what constitutes a "managed service company" (MSC) and explains the concept of an "MSC provider" being involved with such a company.

• A company is an MSC if it mainly provides an individual's services to clients, the individual receives most of the fees, payments are structured to reduce tax and national insurance below employment income levels, and an MSC provider is involved with the company.
• An MSC provider is "involved with the company" if they (or an associate) benefit financially on an ongoing basis, influence or control the services or payments, influence or control the company's finances or activities, or give or promote undertakings to cover any tax loss.
• Professionals providing legal or accountancy services, and businesses that simply place individuals with clients, are not treated as MSC providers solely by virtue of those activities.
• However, the exemption for placement businesses is lost if the business or its associate influences how payments are made, promotes undertakings to cover tax losses, or influences the company's finances or activities beyond merely influencing the provision of services.