Churchill Knight & Boox clients being investigated as Managed Service Companies

[Guy Incognito]

Looking at how the instructions for calculating the deemed payment are worded in the HMRC internal guidance. The deemed payment is counted as anything you receive from the MSC (not the fee income of your MSC) for the provision of services that isn't either earnings or allowable expenses under PAYE rules.

SO

They will argue that corporation tax isn't part of this calculation and therefore you can't claim it back.

If they use this method my company is not an MSC as I will not fulfill

"The individual (worker) supplying their services to the third party client receives payments (or an aggregate of payments and benefits) from the service company equal to the greater part of the sums received by the service company from the client for the services provided by the worker."

ESM3510 - Managed Service Companies (MSC): meaning of an MSC - HMRC internal manual - GOV.UK (www.gov.uk)

Second condition
The individual (worker) supplying their services to the third party client receives payments (or an aggregate of payments and benefits) from the service company equal to the greater part of the sums received by the service company from the client for the services provided by the worker.

The time period for comparison is triggered when a payment is made from the company to the worker, or associate. This time period links with the charging provision, which is given effect when a payment is made.

The intention of the legislation is to compare on a cumulative basis rather than any particular timeframe.

Example
First payment: assume the company receives a payment for the services of the worker of £500 and pays £300 to the worker or associate. The worker has received an amount equal to the greater part of the amount received for the services.

Second payment: assume an amount of £250 is paid to the worker or associate, which is derived from a receipt by the MSC of £400. The comparison is now £900 against £550, and again the worker has received an amount equal to the greater part of the total amount received for the services.

This comparison will continue as each subsequent payment is made.

Using this method I calculated the % every single time one of the following two things happened since incorporation until 06 April 2018.

(i) The company receives a payment for the services of the worker
(ii) The amount worker received for the services

and then checked the %, The number never exceeds 50%.

[jamesbrown]

Right, unless you personally received the better part of the fee income, then your company cannot be an MSC under 61B(1) because (a) through (d) are all required, of which (b) says:

payments are made (directly or indirectly) to the individual (or associates of the individual) of an amount equal to the greater part or all of the consideration for the provision of the services,

[Guy Incognito]

Right, unless you personally received the better part of the fee income, then your company cannot be an MSC under 61B(1)

Except my appeal is stood over because they didn't read it.

[jamesbrown]

Except my appeal is stood over because they didn't read it.

Understood, but the facts will eventually matter. That is to say, there are probably also companies on the pile that were not clients of CK or Boox in 17/18.

[CA100]

Except my appeal is stood over because they didn't read it.

I'm in something like the same position. My personal income was less than 50% because of the amount paid into pension. There's no clarity on whether employer pension contributions are being classified by HMRC as income or benefit in this context, which I don't believe they would be in other contexts.

I posed this specific question in my appeal, but received no response from HMRC other than generically acknowledging the appeal.

[Guy Incognito]

My MP had a response from HMRC and forwarded it to me. HMRC simply summarise the situation in A4 two pages.

The following excerpt gives me a little hope:

"The MSC legislation is designed to ensure companies which are responsible for their own ownership, directorship and management are not caught by the rules. The legislation applies where a promotor has a significant degree of influence over the company that is providing their services".

[Fred Bloggs]

My MP had a response from HMRC and forwarded it to me. HMRC simply summarise the situation in A4 two pages.

The following excerpt gives me a little hope:

"The MSC legislation is designed to ensure companies which are responsible for their own ownership, directorship and management are not caught by the rules. The legislation applies where a promotor has a significant degree of influence over the company that is providing their services".

So - Many pages ago, I maintained that if you had a simple book keeping relationship with the accountant and can demonstrate that, then you are not an MSC. Still seems the case to me today. Hector probably doesn't want that outcome, but it's not entirely his call on that.

[GregRickshaw]

So - Many pages ago, I maintained that if you had a simple book keeping relationship with the accountant and can demonstrate that, then you are not an MSC. Still seems the case to me today. Hector probably doesn't want that outcome, but it's not entirely his call on that.

Yip. Something I have been on a mission to prove and unearthed just about everything I can think of to help and prove but .....

If the courts find in HMRC's favour (of us being MSC) then this will be the most outrageous and corrupt raid on contractors ever. It will make the loan charge seem like a gentle ticking off.

FWIW I don't believe either the portal is the crux of this at all. If using an electronic method, for tracking expenses/invoices etc., is HMRC's thrust then it beggars belief what might come next considering the current rhetoric.

Also IMHO CK and Boox will be proved to be MSCP so again this is why we have to prepare individually.

[Fred Bloggs]

Yip. Something I have been on a mission to prove and unearthed just about everything I can think of to help and prove but .....

If the courts find in HMRC's favour (of us being MSC) then this will be the most outrageous and corrupt raid on contractors ever. It will make the loan charge seem like a gentle ticking off.

FWIW I don't believe either the portal is the crux of this at all. If using an electronic method, for tracking expenses/invoices etc., is HMRC's thrust then it beggars belief what might come next considering the current rhetoric.

Also IMHO CK and Boox will be proved to be MSCP so again this is why we have to prepare individually.

And when you do, I am sure you won't be an MSC. Those less well prepared may not be so lucky. But that's life.

[Peoplesoft bloke]

May I just ask those of you using CK or Boox - was there any aspect of those companies conducting transactions on your behalf - eg invoicing clients and receiving funds, or making payments to HMRC etc - or did all of that remain under your control? I'm just curious as to how it worked in relation to other "full service" type accountancy outfits.