DANSP40700 | Notices of decision: Wording of decisions relating to managed service companies

DANSP02250, DANSP02300 and DANSP25750 provide guidance about the legislation that allows decisions to be made relating to managed service companies (MSCs). See DANSP25800 for guidance about decisions regarding the transfer of debts.

The example below applies the legislative requirements and general principles described in DANSP29200 and DANSP29300.

Example

Conditions are met so that HMRC can treat:

DF Ltd, a MSC, as making to Michael Potts, a payment or benefit which is to be treated as earnings from an employed earner’s employment. HMRC can also treat Michael Potts as receiving a payment or benefit which is to be treated as earnings from an employed earner’s employment.

For the purposes of this example:

• no Class 1 National Insurance contributions (NICs) have been paid. Class 1 NICs are due on the amounts treated as earnings from an employed earner’s employment.

• Michael Potts was paid cash and benefits from the MSC. All payments and/or benefits were received by Michael Potts.

• the MSC provided Michael Potts’ services to their client ABC Ltd.

Wording of decision

My decision is that:

DF Ltd provided Michael Potts’ services during the period from 1 May 2018 to 30 September 2019.

Michael Potts received payments and benefits from DF Ltd in respect of the services provided by DF Ltd during the period from 1 May 2018 to 30 September 2019.

The payment and benefits Michael Potts received in respect of his services provided by DF Ltd in the period from 1 May 2018 to 30 September 2019 are not earnings derived from employed earner’s employment with DF Ltd.

Michael Potts received payments or benefits in the period 1 May 2018 to 30 September 2019 which are treated as if made by DF Ltd and are considered earnings from an employed earner’s employment (attributable earnings).

DF Ltd is liable to pay primary and secondary Class 1 contributions for the period from 1 May 2018 to 30 September 2019 in respect of the payments and benefits Michael Potts received.

The amount DF Ltd is liable to pay in respect of those payments and benefits is £15,356.98.

The amount DF Ltd has paid in respect of those payments and benefits is £0.00.

Notices of decision

In this example, the DAA1(A) will go to DF Ltd and the DAA1(B) will go to Michael Potts.

Payments and/or benefits paid to an associate of the worker

If payments and/or benefits are paid to an associate of the worker the decision should show they were paid to the associate. So, in the above example, if DF Ltd made all payments and/or benefits to Michael Potts’ wife the decision should read

My decision is that:

DF Ltd provided Michael Potts’ services during the period from 1 May 2018 to 30 September 2019.

Michael Potts’ wife, Josie Potts, received payments and/or benefits from DF Ltd in respect of the services provided by DF Ltd during the period from 1 May 2018 to 30 September 2019.

The payment and/or benefits Michael Potts’ wife, Josie Potts, received in respect of Michael Potts’ services provided by DF Ltd in the period from 1 May 2018 to 30 September 2019 are not earnings derived from employed earner’s employment with DF Ltd.

DF Ltd is liable to pay primary and secondary Class 1 contributions for the period from 1 May 2018 to 30 September 2019 in respect of the payments and/or benefits Michael Potts’ wife received.

The amount DF Ltd is liable to pay in respect of those payments and/or benefits is £15,356.98.

The amount DF Ltd has paid in respect of those payments and/or benefits is £0.00.

Notices of decision

In this example, the DAA1(A) should be issued to DF Ltd and the DAA1(B) should be issued to Michael Potts. Michael Potts’ wife, Josie Potts is named in the decision but a DAA1(B) should not be issued as she is unaffected by the decision.

Decision needed for more than one worker

Where a decision is needed for more than one employee see DANSP41000.