HMRC have updated their guidance, following the recent decision in Christianuyi Ltd v R & C Commrs  UKUT 10 (TCC), in which the Upper Tribunal ruled that a number of companies were operating as managed service companies (MSCs).
In this case, the Upper Tribunal upheld the decision of the First-tier Tribunal that the appellant companies were MSCs within the scope of the MSC legislation, and subsequently that the individuals were liable for PAYE income tax and National Insurance contributions (NICs) on the dividends they received from the appellant companies.
Where a company is set up to provide a worker's services to an engager and the MSC legislation applies, amounts paid to an MSC for those services that are not already subject to PAYE income tax and Class 1 NICs (for example, share dividends), are treated as employment income.
HMRC's firm view, now supported by the tribunal decision, has always been that these types of arrangements do not work.
HMRC continue to open enquiries into users of similar arrangements that include the provision of workers in many different industry sectors, including road haulage, healthcare and education.
HMRC state that they will investigate and challenge these arrangements through every route open to it (including litigation) and seek full settlement of the tax due, plus interest and penalties where appropriate.
In particular, they have stated that they expect those using the same or similar arrangements to pay the tax and NICs they owe following 'this emphatic win for HMRC'. Further guidance on the MSC legislation and the Christianuyi case, can be found in HMRC's Spotlight 32.