Churchill Knight & Boox clients being investigated as Managed Service Companies

[SwissSaffa]

I thought they were like Crunch - but they do seem to have made a haste migration from a custom app to Xero (why?) in February. Data from Boox Reviews | Read Customer Service Reviews of www.boox.co.uk (trustpilot.com)

no idea. I am trying to close my limited company but HMRC blocked This due to intvestigation of Boox. Boox was never involving with my business and my clients. I doubt there is a problem.

[Chevalier]

We are in danger of going round in circles here. The fact is that CBS isn't a great example to see why CK is being targeted. We know CK did something wrong (in HMRC's eyes) but we haven't got a clue what it is.

I think there are clues from HMRC

https://www.gov.uk/hmrc-internal-man...manual/esm3520

Certainly one area that springs to mind is the third activity: distribution of profits. If the product used suggests £x can be distributed and that happens regularly then I could see why that might provoke interest. From what I can tell even freeagent provides this information.

[jamesbrown]

I think there are clues from HMRC

https://www.gov.uk/hmrc-internal-man...manual/esm3520

Certainly one area that springs to mind is the third activity: distribution of profits. If the product used suggests £x can be distributed and that happens regularly then I could see why that might provoke interest. From what I can tell even freeagent provides this information.

This was linked earlier in the thread. Provision of information, such as tax advice, is absolutely fine, that is what accountants do. The problem would arise if something were baked into a "solution" or "product", perhaps implemented via a portal, and assumed and adopted by default for all clients using that solution/product/portal. FA is just bookkeeping software; it doesn't impose anything on you; you set your own payroll and you edit it at will (providing you have the appropriate access level, which you should have... otherwise something smells).

[Chevalier]

FA is just bookkeeping software; it doesn't impose anything on you.

I wouldn’t say imposition is the sole test. The wording is “influence OR control”.

So if a portal says £x is distributable and the shareholder takes £x regularly then I could certainly see why the question might be asked.

It also doesn’t necessarily mean advice hasn’t been taken….but that might be the crux of the investigations

[jamesbrown]

I wouldn’t say imposition is the sole test. The wording is “influence OR control”.

So if a portal says £x is distributable and the shareholder takes £x regularly then I could certainly see why the question might be asked.

It also doesn’t necessarily mean advice hasn’t been taken….but that might be the crux of the investigations

You're way off-piste here. It is a statement of the obvious that bookkeeping software will provide balance sheet information so that the responsible parties know the financial state of the company they are running and can decide on things like distributable reserves for dividend payments. Indeed, it is a requirement in law that a valid dividend, one that is not ultra vires, comes from distributable reserves.

[mudskipper]

We pay our accountants for advice. Sometimes I act on my accountant's advice, sometimes I ignore it.

Acting on an accountant's advice != MSC

[Chevalier]

You're way off-piste here. It is a statement of the obvious that bookkeeping software will provide balance sheet information so that the responsible parties know the financial state of the company they are running and can decide on things like distributable reserves for dividend payments. Indeed, it is a requirement in law that a valid dividend, one that is not ultra vires, comes from distributable reserves.

Dividends out of distributable reserves? - absolutely!
Equal to? - not necessarily, other considerations apply eg cashflow/risk

Slavishly following a bit of software might put a contractor at risk without additional backup based upon what I’ve read.

[jamesbrown]

Dividends out of distributable reserves? - absolutely!
Equal to? - not necessarily, other considerations apply eg cashflow/risk

Slavishly following a bit of software might put a contractor at risk without additional backup based upon what I’ve read.

How do you slavishly follow a balance sheet?

If the distributable reserves are £500k, that is not an instruction to declare a £500k dividend.

Again, you're way off base. There are no assumptions or suggestions in FA (or similar tools, to my knowledge) about payroll or dividends that minimise tax or maximise tax or optimise against any other random objectives, tax or otherwise. That is not what bookkeeping software does.

On the other hand, an MSCP can certainly use a portal or accounting software to implement a strategy or product that applies to many clients, which would be a problem and is presumably the problem faced by some or all clients of CK.

These two things are apples and pears. It's the difference between a gun and shooting yourself in the foot.

[eek]

Well this is ironic

https://www.churchill-knight.co.uk/w...170313-RB5.pdf

As I said ages ago the issue here has to be the portal and in all likelihood the fact the portal defaulted suggested figures into certain boxes.

it really wouldn’t surprise me if HMRC’s current definition of an MSC is a custom portal providing instructions on what to do - and that the difference becomes something as stupid as a value being auto populated rather than entered manually.

[Fazlbob]

Just out of interest for those affected, what are you doing about retaining CK?

Assuming this goes on now for a few years whilst we find out HMRC's stance, if you were to retain CK as your accountants and with them not actually knowing what they have done wrong, could you be impacted further for 2022/23 and 2024/25?