This structure became popular with independent contractors and was used as a way of earning high net returns (up to 85% of gross)[citation needed] compared to PAYE, with little corporate responsibilities.
After a period of consultation and re-draft, the new legislation became law in April 2007 with additional aspects coming into force in August 2007 and fully in January 2008.
A PAYE umbrella company is effectively exempted from the legislation, which also seeks to pass the possible burden of unpaid debt (should a provider "collapse" a structure) to interested parties e.g. A recruitment agency that has been deemed to encourage or facilitate the scheme.
This method of remuneration offered significant financial benefits, as it avoided the payment of national insurance contributions and income tax that would otherwise have been due if the contractor was paid entirely under PAYE (salary).
To strengthen this law, the government has allowed the recovery of any underpaid taxes from relevant third parties—primarily those behind the MSC as well as connected or controlling parties Some companies still offer variations on these schemes, so it can be confusing to a contractor to know what is legal and what is not.