Press releaseFriday 08 December 2006

PRE-BUDGET CONSULTATION ON MANAGED SERVICE COMPANIES WELCOMED

The Government has announced in its pre-Budget report (06/12/06) that it intends to introduce legislation to tackle disguised employment through managed service company (MSC) schemes.

The proposed new law will co-exist with the current IR35 legislation, which was implemented in April 2000, to tackle disguised employment through one-man limited companies.

According to giant group plc, the contractor services provider, when the proposed new rules take affect in April 2007, contractors will have to choose between operating through their own personal service company (PSCs) or an umbrella company. Those contractors who will have assignments that are outside IR35 and are therefore eligible for a dividend or, will have a mixture of assignments that are both outside and inside IR35, will choose the PSC route whilst those contractors who will always have assignments caught by IR35, will choose the umbrella route.

Matthew Brown, Managing Director, giant group, comments: "Regulation against unscrupulous MSC scheme managers is welcomed. These unscrupulous scheme managers have in the past touted non-compliant schemes, leaving the Exchequer facing significant losses when the legitimacy of these schemes has been successfully challenged. Unfortunately these scheme managers have an effect on other managers, like giant, who have always operated compliantly."

"Measures to reduce non-compliance are fully supported by giant, and if non-compliant schemes are closed down by this legislation, contractors, end clients, and fully compliant scheme providers like giant, all stand to benefit."

Tax law has undergone significant change in recent years. Despite the uncertainty this has caused for contractors, giant has always developed, and will continue to develop to meet these new proposals, the most cost-effective and hassle-free solutions, allowing contractors to continue to benefit from their correct tax status while fully complying with existing legislation.

The IR35 status of giant contractors is subjected to the highest independent standard of compliance. Contractors are only allowed to receive dividends after an independent review of their contract and working practices by Qdos Consulting on an assignment-by-assignment basis.

Contractors who are deemed outside IR35 by Qdos are automatically covered against any claims for tax, NICs, interest or fines by giant’s UK exclusive IR35 insurance product, underwritten by Groupama.

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