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ESM3620 | Managed Service Companies (MSC): The MSC Debt

From HM Revenue & Customs · Employment Status Manual

An MSC’s PAYE and Class 1 NICs debt can only arise by virtue of one of the existing provisions within the PAYE/NICs legislation:

  • HMRC issues a Determination under Regulation 80 Income Tax (Pay as You Earn) Regulations 2003/a Decision under Section 8, Social Security Contributions (Transfer of Functions, etc.) Act 1999; or

  • On receipt of the MSC’s P35, the sum shown on the form as payable exceeds that paid and a certificate is prepared under Regulation 76(2) Income Tax (Pay as You Earn) Regulations 2003/Paragraph 22(5), Sch. 4, Social Security (Contributions) Regulations 2001 (where HMRC formally certifies the PAYE and NICs underpaid in accordance with the P35); or

  • HMRC prepares a certificate under Regulation 77(6) Income Tax (Pay as You Earn) Regulations 2003/Paragraph 14(1), Sch. 4, Social Security (Contributions) Regulations 2001 (where, after the end of a tax period an employer has not paid any PAYE or NICs, or HMRC believes the amount paid is not the correct amount due, HMRC issues a return to the employer requiring details of the PAYE and NICs due); or

  • HMRC serves a notice under Regulation 78(4) Income Tax (Pay as You Earn) Regulations 2003/Paragraph 15(1), Sch. 4, Social Security (Contributions) Regulations 2001 (where, after the end of a tax period an employer has not paid any PAYE or NICs, or HMRC believes the amount paid is not the correct amount due, HMRC having regard to the employer’s past payments, specifies the PAYE and NICs due and issues a notice in that sum); or

  • HMRC prepares a certificate under Regulation 79(2) Income Tax (Pay as You Earn) Regulations 2003/ Paragraph 26(4), Sch. 4, Social Security (Contributions) Regulations 2001 (where HMRC has inspected an employer’s PAYE records and certifies the amount of PAYE and NICs due).

The sum of PAYE and NICs considered to be irrecoverable within a reasonable time (Regulation 97C(1)(b)/Regulation 29C(1)(b)) from the MSC is known as the “Specified Amount.”

“Reasonable time” is not defined in legislation, but for practical purposes within three months should normally be considered within a reasonable time.