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Managed service companies and tax avoidance

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HMRC has updated ‘Spotlight 32’ in the series on tax avoidance schemes it is actively challenging, following the Upper Tribunal decision in Christianuyi Ltd and others [2018] UKUT 10 (TCC) involving managed service companies.

The Upper Tribunal upheld the earlier decision of the First-tier Tribunal, in addition to which it considered further the definition of a managed service company (MSC) provider. HMRC says this has confirmed its view that a person is a MSC provider if it:

  • promotes or facilitates the use of a company; and
  • that company provides the services of an individual.

The Upper Tribunal also gave the words ‘influences’ or ‘control’ a wider meaning than in the First-tier Tribunal decision. The provider had influenced how payments were made to workers through the use of a standard product. When workers buy into standard products, allowing the MSC provider to determine the amount to be paid as a dividend and to carry out the administrative steps, this amounts to ‘control’.