Churchill Knight & Boox clients being investigated as Managed Service Companies

[jamesbrown]

I’m not so much thinking about what happens in this case but the end point that HMRC wishes to get to after this set of cases and subsequent ones.

remember that the MSC legislation was designed to target people using limited companies to minimise the tax they pay. An accountant switching you between a limited company and a payroll provider as contracts changed is coming VERY close to that purpose.

+1, FWIW. Companies that facilitate switching between inside and outside gigs will be a target in future (as it relates to the liability for the outside gigs) because Chapter 9 is (once the case law is supportive) even easier to enforce for large numbers of contractors and more powerful than Chapter 10.

[GregRickshaw]

Does anyone know what Boox or CK fee structure was for a limited company, did it ever change related to invoices amounts or quantity?

CK fee never changed it was a fee for accountancy, you could pay it yearly or monthly.

The only time it changed was; if you weren't trading then there was an a dormant fee/inactive fee. This is one of the arguments that 'kind of' CK benefitting financially from the trading standpoint of the company.

This is going to be a big argument even though CK never benefited more financially depending on your invoice amount of any particular year/month, could it be seen as benefitting more or less depending on your trading level. Something only a judge is going to decide.

[eek]

CK fee never changed it was a fee for accountancy, you could pay it yearly or monthly.

The only time it changed was; if you weren't trading then there was an a dormant fee/inactive fee. This is one of the arguments that 'kind of' CK benefitting financially from the trading standpoint of the company.

This is going to be a big argument even though CK never benefited more financially depending on your invoice amount of any particular year/month, could it be seen as benefitting more or less depending on your trading level. Something only a judge is going to decide.

The thing is that there is zero difference in the work required by an accountancy firm for an inactive company and an active company which means that discount does mean CK was benefiting from you trading (albeit less than they would be benefiting from a tiered approach).

And remember the purpose of this case is to extend case law slightly in HMRC's preferred direction.

[GregRickshaw]

The thing is that there is zero difference in the work required by an accountancy firm for an inactive company and an active company which means that discount does mean CK was benefiting from you trading (albeit less than they would be benefiting from a tiered approach).

And remember the purpose of this case is to extend case law slightly in HMRC's preferred direction.

Well they did even less work for inactive companies. After a year of inactive there are no VAT quarters to do. Dormant they did the VAT and Year Ends, so the same amount of work for less money for dormant, less work for even less money for inactive.

Which I have said all along if HMRC want to test that rule, which looks the most likely to break, it's hard to argue CK did not benefit depending on levels on income.

[eek]

Well they did even less work for inactive companies. After a year of inactive there are no VAT quarters to do. Dormant they did the VAT and Year Ends, so the same amount of work for less money for dormant, less work for even less money for inactive.

Which I have said all along if HMRC want to test that rule, which looks the most likely to break, it's hard to argue CK did not benefit depending on levels on income.

after a year on inactivity the work lessened - but, from memory. the discount kicked in a lot sooner if you asked for it.

[jamesbrown]

I think you can mount an argument that there was a commercial motivation for the dormant fee. At the very least, there were fewer questions to answer during the year. However, the legislation is defined in more general terms. The test is "benefits financially on an ongoing basis from the provision of the services of the individual". This isn't about the mere levying of a fee. However, if the cost of accountancy increases when the company is active, then the accountant benefits from the service provider being in work. As others have said, there is room for interpretation here and I can easily see decisions being overturned as it progresses through the tribunal and court system.

[Hareforthebear]

Yep it's those blasted fees that are going to be the main problem.

Interesting, that Boox has shut down its YouTube, LinkedIn and Twitter accounts now and they are marked as permanently closed on google! Also, the original company Boox has an active proposal to strike off. The app accounting group is still trading though, wonder if there is any significance to this?

The App Accounting Grouo used to be called BOOX, it changed its name to the App Accting group prior to the other entity called BOOX Ltd being set up, I have always been contracted to the original entity I don’t think the ‘boox Ltd’ that is being struck off ever traded. BOOX is a trading name of the app accounting group. Looks like they have also spun out a new business, the app accounting group trading as ‘square accounting’. Do not look like ‘contractor specialists’ and the timing looks rather suspicious, I would have to presume in the first instance it is an attempt to distance themselves from the investigation. Or maybe I’m just too cynical.

[Guy Incognito]

+1, FWIW. Companies that facilitate switching between inside and outside gigs will be a target in future (as it relates to the liability for the outside gigs) because Chapter 9 is (once the case law is supportive) even easier to enforce for large numbers of contractors and more powerful than Chapter 10.

I would absolutely not wish to be associated with anyone providing this service. Seems any easier claim of 'control' than CK/Boox imo.

[Guy Incognito]

This is crux of the CBS case regarding whether the "MSC provider benefit financially on an ongoing basis from the provision of the services of the individual".

297. CBS deposited amounts which it had deducted in respect of taxes in its bank accounts with Allied Irish Bank and CredEcard and then, subsequently, with The Royal Bank of Scotland. CBS earned interest on these accounts as described above. The interest accrued in respect of the deposit of monies which CBS had deducted on account of taxes. That deduction arose every time the appellant was paid in respect of the services performed by its shareholder. In our view, the receipt of interest on amounts deposited was derived from amounts earned in respect of the services performed by the individuals and thus falls within s 61B(2)(a).


“We consider that in each case CBS benefited financially on an ongoing basis from the services provided by the individual…The fixed fee per transaction basis of charging was also clearly related to the services provided by the individual. The fee was only charged when a payment was received by the personal service company. Moreover, the fee related to the number of payments received by the client (from the agency) rather than the number of times the payroll had to be run or a payslip produced. Thus, if the client received two payments in one week from the agency, CBS ran one payroll and produced one payslip, but charged two fees. Thus, the fees relates to the number of payments received (which was a factor of the amount of work done by the client) rather than the number of times it had run a payroll or produced a payslip. This, in our view, is a sufficiently close link to establish that CBS benefited “from” the services provided by the individual.”

This is pretty damning. There is no equivalent for CK or Boox that I am aware of.

[eek]

This is crux of the CBS case regarding whether the "MSC provider benefit financially on an ongoing basis from the provision of the services of the individual".

297. CBS deposited amounts which it had deducted in respect of taxes in its bank accounts with Allied Irish Bank and CredEcard and then, subsequently, with The Royal Bank of Scotland. CBS earned interest on these accounts as described above. The interest accrued in respect of the deposit of monies which CBS had deducted on account of taxes. That deduction arose every time the appellant was paid in respect of the services performed by its shareholder. In our view, the receipt of interest on amounts deposited was derived from amounts earned in respect of the services performed by the individuals and thus falls within s 61B(2)(a).


“We consider that in each case CBS benefited financially on an ongoing basis from the services provided by the individual…The fixed fee per transaction basis of charging was also clearly related to the services provided by the individual. The fee was only charged when a payment was received by the personal service company. Moreover, the fee related to the number of payments received by the client (from the agency) rather than the number of times the payroll had to be run or a payslip produced. Thus, if the client received two payments in one week from the agency, CBS ran one payroll and produced one payslip, but charged two fees. Thus, the fees relates to the number of payments received (which was a factor of the amount of work done by the client) rather than the number of times it had run a payroll or produced a payslip. This, in our view, is a sufficiently close link to establish that CBS benefited “from” the services provided by the individual.”

This is pretty damning. There is no equivalent for CK or Boox that I am aware of.

Bit that isn’t what Boox and CK have been accused of.

it’s things such as suggesting salary levels and making a profit.