How do I know if my company is affected?
HMRC has four years after the end of that tax year to recover unpaid tax and issue a determination notice that a company can be determined as MSCP and that their company clients are MSCs.
For the tax year 2017-18, HMRC had until the 5 April 2022 to issue a determination that your company was a MSC for that tax year. Similarly, for the tax year 2018-19, HMRC has until the 5 April 2023 to issue a determination that your company was a MSC for that tax year.
Your accountancy services provider may communicate with you that they have been determined as a MSCP. It is likely your company will receive a Notice of Regulation 80 determination letter from HMRC.
This determination letter issued to your company will explain that your accountancy services provider has been determined as a MSCP for a certain tax year and as such your company, now considered to be an MSC for that tax year, owes employment income tax and National Insurance.
In March 2022, HMRC sent out Reg 80 determination letters to over 1000 contractor companies, following an investigation into two accountancy service providers, deemed by HMRC to be MSCPs.
Many of these letters have been in the form of protective determinations hastily issued in the first quarter of 2022 to avoid any tax due in the 2017-2018 tax year falling ‘out of time’ for collection on 6 April 2022. In the letters, HMRC state they have not concluded their enquiries, and should it be determined the MSC legislation doesn’t apply then the determinations will be vacated. Nevertheless, these letters must NOT be ignored and it is very likely HMRC will go through the same process again towards the end of the current tax year to ‘protect HMRC’s position’ for 2018/19.
A small number of IPSE members are amongst those who have been contacted.
If you are unsure if your company is affected, you can contact your accountancy services provider or if you are expecting but have not yet received a determination letter from HMRC, you can write to HMRC to check on correspondence.
What are the next steps in HMRC’s current MSC enquiries?
HMRC will now be seeking to prove, with test cases of MSCs, that the two accountancy services providers were MSCPs and were “involved” with the MSCs and can thus be determined as a MSCP.
IPSE recommends that if you have received a determination letter, that you begin the process of gathering all correspondence with your accountancy services providers, contracts and other evidence that may support your case. For instance, it would be beneficial to gather information or correspondence that indicates that you were in control of your company’s finances and the way payments were made for the relevant tax year.
If HMRC are unable to establish that the accountancy services providers are in fact MSCPs, the liability for all the employment tax due in the determination letters will go away.
However, should HMRC be successful in proving that the accountancy services provider is in fact a MSCP and that your business is a MSC, the liability becomes payable.
At this point, IPSE Plus members will benefit from tax and legal advice and we can assist you in fighting HMRC’s determination that your company is a MSC, if you have a legitimate case.
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