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Questions and Answers - the Facts in a Nut Shell

I have been told that I now need to run to my own company (PSC). Why is this?

On the 6th of December, the government put forward proposed legislation which aimed to tackle the wide scale non-compliance by MSC Scheme Providers in the contacting industry.
To circumvent this legislation, the MSC Scheme Providers believed that by simply moving their contractors into PSC's they would achieve this.
Indeed, until very recently the industry was witness to a wide-scale migration of contractors from Composite Companies into PSC's. Company formations over the last 2 months have reached record levels.

I get the feeling that all is not well. What's happened?

Had there been no difference between the Proposed Legislation and the Draft Legislation, the MSC Scheme Providers would have been right.
The truth is they have got it horribly wrong. There are massive differences between the Proposed and the Draft Legislation, and the implications to those blindly doing as they told (that is setting up their PSC) are enormous.

What has changed since the Budget Speech?

For the MSC Scheme Providers and those that use them - a lot.
In what can only been described as some of the most aggressive legislation in recent years, the government has made it very clear, that they have every intention to wipe out any form of non-compliance in the temporary worker market.
Tax motivated incorporation in eyes of HMRC equates to non-compliance.

But the MSC Scheme Providers have got away with it before?

Yes, but this time the legislation does not tackle the Products (Composite Companies) that MSC Scheme Providers create, but rather the MSC Scheme Provider themselves.
Let's just say - the government is calling it a day.

Who is the MSC legislation really aimed at?

In short the MSC Scheme Providers themselves, regardless of whether they provide:
  • Composite Companies
  • Managed Personal Service Companies
  • Personal Service Companies

Aaah, but what about Umbrella's?

We can categorically state that PAYE Umbrella's (Employment Management Companies) are not the Target. Refer to the definition below, and we feel you will agree with us.

How can Atlantic Umbrella be so sure?

The principal shift in emphasis between the Proposed and the Draft legislation, can be found in the definition.
In short, the definition is both significantly tighter than what it was, and it also re-directs its focus onto the MSC Scheme Provider themselves.
The definition also has some important exclusions, which make it very clear that HMRC want compliant operatives to continue providing services to the contracting industry. Refer to the definition.

Aaah, but everyone says that their "system" is outside the legislation?

Okay but have you noticed how, what you are reading right now is open to the general public? To date we have not seen a single publicly announced statement from an MSC Scheme provider, advocating what they are doing...
Secondly, why are all the MSC Providers now frantically running toward setting up PAYE Umbrella's?

But that means I am okay again, right?

Are you sure? Principally there are 2 issues you need to consider:
  • Firstly, history shows that HMRC always make an example of legislation offenders. It is HMRC's modus operandi.
    It is safe to assume that a few MSC Scheme Provider(s) will come under a direct HMRC legal attack within the short term. With that in mind, do you want an HMRC Tax Inspector pouring over your figures? You will do if your MSC provider is the one chosen by HMRC.
  • Secondly, with no experience in running a proper pay rolling service, can you be sure that you will even get the service or expertise that are required? Do they possess an HMRC expenses Dispensation?

Ok, but who says Atlantic Umbrella won't be visited?

Fair question - let's consider the facts:
  1. Atlantic Umbrella has been operating in a compliant fashion for the last 5 years. We are an Employment Management Company, not an MSC Scheme Provider.
  2. We have never been an MSC Scheme Provider ever. We have never ever paid dividends or used any other tax avoidance/evasion mechanisms in our trading history. HMRC know this.
  3. In recognition of our meticulous approach to Contractor management and strong internal controls, we were issued an Expenses Dispensation by HMRC in 2005.
  4. We currently still hold our Expenses Dispensation. And here is a bit of insider info- none have been issued in the last year. So if you come across some 'up-start' claiming to have one, check it out. Chances are you are being deceived.
We are making two points here. Firstly, by virtue of our history of compliance we are not under the spot light, secondly even if we were; we have nothing to worry about. And if you are with us, neither will you.
That is more than any MSC can offer you.

I want to see the MSC definition for myself?

Refer below to the section "MSC definition and explanation". We have it line for line, just click here