It pays to check the law

News

Government moves to cut down on tax dodgers could affect company pay schemes, warns Julian Ball.

Engineering contractors across the UK have been reviewing their pay and accountancy arrangements to ensure they stay within the law since the definition of managed service companies (MSCs) was confirmed in the Budget announcement.

The Finance Bill, which is due to get Royal Assent next month, includes measures to tackle 'tax avoidance' schemes. Contractors will need to know if they can carry on using their existing accounting and payroll provider.

If you work through an umbrella company, or a structure where all income is taxed under PAYE, then the answer is yes, you can. The new law does not affect you.

If you think you are already using a personal service company (PSC), and you receive part of your income as a dividend, ask yourself the following questions:

 - Are you the director of your company? Do you have a company bank account and are you the signatory?

 -  Do you control the way that money is drawn from the account and do you decide the amounts and timings of withdrawals?

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