I am a contractor and I work through a managed service company. The organisation that runs this company wants to transfer me into a new personal service company to avoid the Budget tax changes. Will this work?
Probably not if there are no other major changes in how everything is organised and run. Your new personal service company will be treated like a managed service company where the provider controls aspects of the personal service company such as the finances, the payments made to you out of that company, or how you find your next contract. The payments to you from the personal service company will have to have PAYE deducted from them after 5 April 2007, even if they are called “dividends”. You will also no longer get a deduction for your traveling expenses. For more advice on how you could structure your own personal service company with a view to avoiding both the new MSC legislation and IR35 please talk to us.