Finance Act 2007 contained provisions that deem dividend (and indeed any other non-employment) income to be employment income where individuals provide their services through managed service companies (MSCs), a managed service company ‘provider’ is involved, and the income is not already treated as employment income. This means MSCs have to operate and account for PAYE tax and NICs on all payments that individuals receive for services provided through the MSC. If the MSC does not pay the tax and NICs, HMRC is able to recover them from others, principally the MSC’s director and the person who provided the company and management services for the company to the individual.

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