That'll be PSC's stuffed then!
03 April 2007, 02:43 PM
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That'll be PSC's stuffed then!
Press release from Giant:
Giant withdraws from the PSC market to save contractors from financial ruin.
Summary
As a company owned and operated by qualified accountants, giant began providing personal service company (PSC) services in 1992, and since the draft MSC legislation in December 2006 we have spent considerable time and money on professional advice as well as the design and build of a new PSC support system.
Despite this long history and significant investment in PSC services giant is announcing it’s withdrawal from the PSC market altogether and will now not be offering the giant trailblazer service. Instead, giant will be focussing on providing its award winning umbrella service giant strongbox as well as outsourced payroll solutions for agencies and others.
Last Thursday the Finance Bill 2007, Regulatory Impact Assessment and, in particular, the Guidance Notes were published which completely changed the original draft legislation regarding MSC’s. Following it’s publication we consulted with our advisors, Baker & McKenzie, KPMG, and Deloitte, and we have taken a leading tax barrister’s advice, and this has prompted our current action.
Our advisors conclusion is that contractors that do business with PSC service providers face financial and reputational ruin, even bankruptcy, both at a corporate and personal level (and they expose other associated parties, eg. directors, shareholders etc, to personal financial risk) even if their service provider is an accountant.
HMRC have made it clear that they will target all PSC service providers and related parties under the debt transfer provisions, which makes for significant and unacceptable risk e.g. A £50,000 contractor operating via a PSC will save approximately £10,000 in tax and NI per annum. This is how much each PSC will owe per annum and the director and associates will be liable for it all. Plus interest!
The only safe operating model will be through a quality umbrella service like giant strongbox. All contractors who have purchased their limited company from giant and begun the move to giant trailblazer, who wish to switch to giant strongbox, can transfer the company back to giant in return for a full refund.
Those contractors who wish to take the unacceptably high level of risk associated with a PSC are free to deregister from giant trailblazer and seek a service provider who is willing to let the contractor take all the risk and face financial ruin. We will not do this.
The detail
Our advisors have been communicating directly with the Treasury and the Director General of HMRC. It has been made very clear that PSC service providers will not exist under any guise within this legislation, and that HMRC will target all PSC’s.
The Treasury and HMRC are determined to drive such companies out of business and pursue all related 3rd party corporates and individuals for the tax and NI debts due. Under the 3rd party debt legislation HMRC are free to financially pursue any of the following persons, at their sole discretion:
• PSC, the contractor, its directors, secretary, shareholders, other associates
• Service provider
• Agency and end client (delayed until January 2008)
• Directors, secretary, shareholders, other associates of the service provider, agency and end client.
The contractor and its associates face personal financial ruin.
Legislation
The legislation now defines an MSC provider so widely that effectively, anyone ‘promoting or facilitating’ a PSC is caught. The Guidance Note (clause 24) makes it clear that accountants and/or companies’ regulated by an accountancy body are not exempt from the legislation if they are also involved in ‘promoting and facilitating’ PSC’s.
Given the speed and tenacity of the Treasury in implementing this anti avoidance and 3rd party debt (corporate and personal) legislation, does anyone seriously believe that an accountancy ‘badge’, will suffice to avoid it, and it is business as usual?
Hence, all service providers in this market place, regardless of whether they are regulated by an accountancy body or not, are caught by the legislation. HMRC can simply target each PSC service provider and all their respective PSC’s will be caught.
Extract from HMRC Guidance Note clause 24: The term: “in a professional capacity”, means that professionally qualified persons [accountants] normally would not be considered to be an MSC provider except to the extent that they are in the business of promoting and facilitating the use of companies to provide the services of individuals [PSC’s].
Our view in brief
Unlike our competitors we are not prepared to put our clients, both contractors and agencies (and their directors, shadow directors, shareholders and other associates), in financial jeopardy.
Therefore giant will not be providing PSC services (giant trailblazer) in the future since there is now only one option (apart from agency PAYE) in which contractors can trade going forward and that is with a quality umbrella solution where they can continue to offset business expenses. In this respect we will continue to invest in our award winning umbrella service, giant strongbox.
Giant withdraws from the PSC market to save contractors from financial ruin.
Summary
As a company owned and operated by qualified accountants, giant began providing personal service company (PSC) services in 1992, and since the draft MSC legislation in December 2006 we have spent considerable time and money on professional advice as well as the design and build of a new PSC support system.
Despite this long history and significant investment in PSC services giant is announcing it’s withdrawal from the PSC market altogether and will now not be offering the giant trailblazer service. Instead, giant will be focussing on providing its award winning umbrella service giant strongbox as well as outsourced payroll solutions for agencies and others.
Last Thursday the Finance Bill 2007, Regulatory Impact Assessment and, in particular, the Guidance Notes were published which completely changed the original draft legislation regarding MSC’s. Following it’s publication we consulted with our advisors, Baker & McKenzie, KPMG, and Deloitte, and we have taken a leading tax barrister’s advice, and this has prompted our current action.
Our advisors conclusion is that contractors that do business with PSC service providers face financial and reputational ruin, even bankruptcy, both at a corporate and personal level (and they expose other associated parties, eg. directors, shareholders etc, to personal financial risk) even if their service provider is an accountant.
HMRC have made it clear that they will target all PSC service providers and related parties under the debt transfer provisions, which makes for significant and unacceptable risk e.g. A £50,000 contractor operating via a PSC will save approximately £10,000 in tax and NI per annum. This is how much each PSC will owe per annum and the director and associates will be liable for it all. Plus interest!
The only safe operating model will be through a quality umbrella service like giant strongbox. All contractors who have purchased their limited company from giant and begun the move to giant trailblazer, who wish to switch to giant strongbox, can transfer the company back to giant in return for a full refund.
Those contractors who wish to take the unacceptably high level of risk associated with a PSC are free to deregister from giant trailblazer and seek a service provider who is willing to let the contractor take all the risk and face financial ruin. We will not do this.
The detail
Our advisors have been communicating directly with the Treasury and the Director General of HMRC. It has been made very clear that PSC service providers will not exist under any guise within this legislation, and that HMRC will target all PSC’s.
The Treasury and HMRC are determined to drive such companies out of business and pursue all related 3rd party corporates and individuals for the tax and NI debts due. Under the 3rd party debt legislation HMRC are free to financially pursue any of the following persons, at their sole discretion:
• PSC, the contractor, its directors, secretary, shareholders, other associates
• Service provider
• Agency and end client (delayed until January 2008)
• Directors, secretary, shareholders, other associates of the service provider, agency and end client.
The contractor and its associates face personal financial ruin.
Legislation
The legislation now defines an MSC provider so widely that effectively, anyone ‘promoting or facilitating’ a PSC is caught. The Guidance Note (clause 24) makes it clear that accountants and/or companies’ regulated by an accountancy body are not exempt from the legislation if they are also involved in ‘promoting and facilitating’ PSC’s.
Given the speed and tenacity of the Treasury in implementing this anti avoidance and 3rd party debt (corporate and personal) legislation, does anyone seriously believe that an accountancy ‘badge’, will suffice to avoid it, and it is business as usual?
Hence, all service providers in this market place, regardless of whether they are regulated by an accountancy body or not, are caught by the legislation. HMRC can simply target each PSC service provider and all their respective PSC’s will be caught.
Extract from HMRC Guidance Note clause 24: The term: “in a professional capacity”, means that professionally qualified persons [accountants] normally would not be considered to be an MSC provider except to the extent that they are in the business of promoting and facilitating the use of companies to provide the services of individuals [PSC’s].
Our view in brief
Unlike our competitors we are not prepared to put our clients, both contractors and agencies (and their directors, shadow directors, shareholders and other associates), in financial jeopardy.
Therefore giant will not be providing PSC services (giant trailblazer) in the future since there is now only one option (apart from agency PAYE) in which contractors can trade going forward and that is with a quality umbrella solution where they can continue to offset business expenses. In this respect we will continue to invest in our award winning umbrella service, giant strongbox.
04 April 2007, 09:17 AM
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PSC - Personal Service Comapny
MSC- Managed Service Company
Translation - how to save yourself a wedge of money via tax savings.
Government really has it in for us guys now and will continue to stamp down
MSC- Managed Service Company
Translation - how to save yourself a wedge of money via tax savings.
Government really has it in for us guys now and will continue to stamp down
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26 February 2001 05:48 PM