Composite service companies exist in a number of different areas of business. These include, for example, construction, IT, teaching, medicine, accountancy etc. Composite service companies usually employ workers and then supply them to clients for whom they work.

An article on the subject of Composite Service Companies (CSC) was included in Tax Bulletin Issue 60. It covered the working arrangements within such companies and it indicated that the companies would need to consider whether the service company legislation (IR35) applies to engagements undertaken by individual workers. This article makes it clear that managed service companies are in the same position, and then gives details of two areas where our compliance teams find frequent errors with the "service company" legislation. These are as follows:

	Some workers, notably teachers, cleaners and entertainers, are deemed to be employed earners for NICs. This means that they are within the service company legislation for National Insurance, irrespective of whether they are within it for tax. The same is true of those holding non-executive directorships via a service company.
	Some workers have been paid travel and subsistence expenses, tax-free, by their composites, even though they do not meet the criteria set out in the legislation. In particular, workers who have only a single assignment with their composite may be subject to tax and NICs on their reimbursed travel costs.

Managed Service Companies
Some promoters, as an alternative to the CSC, offer managed service companies (MSC). The promoter will set up the company, appoint the director(s), company secretary etc and deal with all the administration. The "worker" will normally be an employee and shareholder of the MSC and will be entitled to receive salary, expenses and dividends. The promoter will retain its administration fee and the balance is available to be paid to the worker. Unlike the CSC there is only one "worker" in an MSC. However, as with CSCs, the MSC will have to consider whether the service company legislation applies to individual engagements with clients.

Kingston UK will assess your employment status to ensure you do not fall inside the IR35 regulations. Simply fill out one of our Status Questionnaire forms and we will contact you within 4 working hours.