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Court victory for HMRC spells more woe for contractors


HMRC won a case against payroll services firm Costelloe Business Services in March prompting the taxman to send out letters to contractors it believes may have used similar companies. Healthcare contractors used Costelloe to bill their clients and process payments, usually as dividends, reducing their tax and NI liability. HMRC argued this structure was in breach of legislation governing “managed service companies” (MSC) and that the income should be taxable as normal. Rebecca Seeley Harris, of PKF Francis Clark, comments: “What I find incredibly unfair is that a contractor can join a scheme 10 years ago which was completely legitimate and suddenly we go through court and it’s an MSC. It causes years of worry and anxiety wondering whether you have done the right thing.”

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