Income Tax (Earnings and Pensions) Act 2003 section 688A

Managed service companies: recovery from other persons

Section 688A allows HMRC to recover unpaid PAYE tax from certain persons connected with a managed service company where the company itself has failed to deduct the correct amount of PAYE from an individual's income.

• Where a managed service company (MSC) fails to deduct the correct PAYE from an individual's income, HMRC can recover the shortfall from directors, office-holders or associates of the MSC, MSC providers, and anyone who encouraged or was actively involved in the MSC providing the individual's services
• Professional advisers providing legal or accountancy advice, and recruitment agencies simply placing an individual with clients, are specifically excluded from this recovery provision
• The regulations may also set out how liability is shared or apportioned between the various persons from whom HMRC can recover the unpaid tax
• The Treasury has the power to amend this section by order, but only with prior approval from the House of Commons