Churchill Knight & Boox clients being investigated as Managed Service Companies

[Hareforthebear]

Then I suspect you are the exception to the rule...

I might be wrong as I haven’t had anything to do with them for a while, but I had a feeling that boox didn’t make the processes etc available in the portal without having this confirmation. Though not sure as I say, I was always sure to do, so the scenario never came up.

[DealorNoDeal]

Your opinion is very different to the multiple experts I've spoken to about this case - they all think HMRC have a fairly decent chance because of the way the CBS judgment opened up whole new areas to attack

Yes, and just imagine what "whole new areas to attack" a win against CK/Boox would open up!!!

MSC = the new IR35

[jamesbrown]

But wouldn't there be less work for CK to do when the company wasn't being used? For example, if the company wasn't used for months on end, wouldn't it be a bit rich for them to keep charging the same monthly fee?

There is a commercial motivation, yes. It will come down to whether that is accepted. It should be accepted.

Remember, the intention of this clause (and the legislation more generally) is to catch artificial arrangements whereby the fee charged by the alleged MSCP is connected to the service provision by the MSC. Absent any consideration of commercial circumstances, then a fee related to whether the MSC is invoicing probably meets the condition. But the commercial circumstances point to it not being an artificial arrangement. Thus, I think HMRC is unlikely to win on this point, but it is live until it gets to a tribunal.

[eek]

There is a commercial motivation, yes. It will come down to whether that is accepted. It should be accepted.

Remember, the intention of this clause (and the legislation more generally) is to catch artificial arrangements whereby the fee charged by the alleged MSCP is connected to the service provision by the MSC. Absent any consideration of commercial circumstances, then a fee related to whether the MSC is invoicing probably meets the condition. But the commercial circumstances point to it not being an artificial arrangement. Thus, I think HMRC is unlikely to win on this point, but it is live until it gets to a tribunal.

Devils advocate

Look at it on an annual basis

Worker 1 works all 12 months paying £1200 a year and has an income of £120,000.
Worker 2 works 9 months of the year and gets a discount so pays £1100. His income is £90,000

Given that the work required is almost identical (and the biggest bit is the end of year accounts that are identical for all firms) I can't see how you can fight an argument that CK profited from the work worker 1 did...

[GregRickshaw]

Devils advocate

Look at it on an annual basis

Worker 1 works all 12 months paying £1200 a year and has an income of £120,000.
Worker 2 works 9 months of the year and gets a discount so pays £1100. His income is £90,000

Given that the work required is almost identical (and the biggest bit is the end of year accounts that are identical for all firms) I can't see how you can fight an argument that CK profited from the work worker 1 did...

Not sure you are Devils advocate, I think anyone arguing against this logic is

The only thing to say is CK did not benefit in all cases.

Forget CK and Boox and their guilt. Get ready to fight this on your own.

[jamesbrown]

Given that the work required is almost identical (and the biggest bit is the end of year accounts that are identical for all firms) I can't see how you can fight an argument that CK profited from the work worker 1 did...

I think this will be a pretty straightforward legal analysis. Was there a commercial motivation for the fee structure, yes or no? If there was a commercial motivation, then there cannot be an artificial motivation. The legislation is focused on artifice. I think there is a commercial motivation because the costs borne by the accountant (alleged MSCP) are reduced. Certainly, they are not dramatically reduced, but the costs are not dramatic in any case. There are no monthly submissions and there is less contact with the client company, both save money for the accountant. But these arguments will be had and I am not professing to be certain about anything.

Personally, I think there is a case to answer for CK and Boox, if only because of their horrendously poor marketing, which is part of the public record, and if they took that attitude to marketing, you can be pretty sure there were some borderline practices under the hood too. So I would not be very confident about the outcome post CBS, even if both companies appear to be acting as accountants.

[DealorNoDeal]

I think there is a commercial motivation because the costs borne by the accountant (alleged MSCP) are reduced.

Not only that, it's a selling point - "X% discount when you're not working".

It's a competitive business, and they should be able to charge whatever makes commercial sense to them. I would hope a Judge would see common sense even if HMRC can't.

[eek]

Not only that, it's a selling point - "X% discount when you're not working".

It's a competitive business, and they should be able to charge whatever makes commercial sense to them. I would hope a Judge would see common sense even if HMRC can't.

Hope is the operative word there - as we both know that's highly unlikely in a tax tribunal...

[jamesbrown]

Hope is the operative word there - as we both know that's highly unlikely in a tax tribunal...

Sadly, this is the biggest danger at one or more stages of the process, particularly the early stages (and hence it is likely to be a costly process) - judges have been increasingly bullish in recent decisions (in favour of the gov't).

[Guy Incognito]

Can you demonstrate that it was agreed and determined by the director - I bet you don't have any evidence going back 4 years to prove that.

I have all my emails from Boox where they explicitly ask me what salary to set and give me eight factors to consider to aid MY decision.