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Back to basics on managed services companies

Thomas Wallace (WTT Consulting) explains how the rules work and what the key risk areas are for advisers.

It’s not just IR35 that contractors should be worried about...

For more than 20 years now successive governments have sought ways to tackle the perceived problem around disguised employees. This started with the introduction in April 2000 of the intermediaries legislation (IR35) (ITEPA 2003 Part 2 Chapter 8). That anti-avoidance legislation was designed to ensure that income received by a personal service company (PSC) – a company that is owned by the worker whose services are being sold – was subject to income tax and both primary and secondary national insurance as if the worker was directly employed by those acquiring their services. The practical effect was to ensure that the tax advantage around being paid through dividends was removed and instead treat distributions as earned income taxed on...

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