Staff status could affect tax and NICs

Employers that use workers sourced through an employment agency or which use staff who class themselves as a managed services company (MSC) could be pursued for outstanding tax and national insurance contributions (NICs) under debt transfer rules.

The draft legislation, which will form a new chapter in the Income Tax (Earnings and Pensions) Act 2003 and is due to come into effect in April, will also enable these debts to be collected from company directors.

Approximately 250,000 people including teachers, nurses, construction workers and IT specialists, currently operate as a MSC. This means they receive a minimal wage that is subject to tax and NICs, while the remainder of their remuneration is in the form of dividends on which no NICs and a lower rate of tax is due.