Churchill Knight & Boox clients being investigated as Managed Service Companies

[enda1]

What you have to remember is; CK and all of the others are not fighting the case for you, if you have paid WTT or DK they are not fighting for you they are merely helping you to appeal the determination (to get it stood over), to appeal the double taxation (conditional claims) and that's it.

CK have done IMHO a great job in giving for free what the others are charing from between £175 and £450 for. Don't be suckered into a group/class action as that is not what is going on with those groups.

Make no mistake here HMRC are not interested in you talking to them to explain your case they want to get this to tribunal and it suits them to wait. HMRC want the FTT and will get it.

The hope you may have is, if your company cannot be MSC due to the way your company operates (eg not a contractor bum on seat, disguised employment etc.,) then HMRC have to release you from the investigation. Again though HMRC have to pointed toward this.

I fully expect absolutely nothing to happen for 2023 and then the fun starts in 2024.

It’s your last point that I believe I fall under. My company provides services to an end client abroad, so we spent a large amount of our time abroad in Italy and France. Not sure how they could fall under U.K. employment law…

thanks for your insight

[jamesbrown]

Absolutely, it's a matter of estimating the liability. From my understanding for a contract inside IR35 the allowable expenses are a 5% allowance (for the expense of running a limited company) plus any pension payments made by the company, everything else is subject to PAYE / NIC contributions.

The 5% for expenses was ditched for the public sector in 2017 and then for the private sector in 2021 (under Chapter 10) - the logic being that there's no admin on the contractor's PSC under Chapter 10. Anyway, that is not part of the deemed payment for Chapter 9/MSC.

[jamesbrown]

It’s your last point that I believe I fall under. My company provides services to an end client abroad, so we spent a large amount of our time abroad in Italy and France. Not sure how they could fall under U.K. employment law…

thanks for your insight

This has nothing to do with UK employment law, it is about UK tax law and your company is/was a UK company, subject to UK tax law. Whether your engagements looked like employment or self-employment is not important (whereas it would be under IR35), the test under the MSC legislation is whether an MSCP was involved with your company.

[Chevalier]

This has nothing to do with UK employment law, it is about UK tax law and your company is/was a UK company, subject to UK tax law. Whether your engagements looked like employment or self-employment is not important (whereas it would be under IR35), the test under the MSC legislation is whether an MSCP was involved with your company.

Actually no, there are some elements that need to be considered and can be found in the legislation…

Broadly speaking the same PAYE rules apply, as if you were working for an overseas company.

https://www.legislation.gov.uk/ukpga...rt/2/chapter/9

See 61G (4) and (5)

I think that plays out depending on how time you spend abroad, whether your client has a U.K. connection etc etc, but may be a complex area.

For example if more than 75% of your working time was in a European country as an employee you would be expected to enrol in that country’s social security system

Whether HMRC can make a personal assessment on you as “ an employee” and resident in the U.K. I don’t know, but you may be afforded some protection by double tax treaties.

[jamesbrown]

Actually no, there are some elements that need to be considered and can be found in the legislation…

Broadly speaking the same PAYE rules apply, as if you were working for an overseas company.

https://www.legislation.gov.uk/ukpga...rt/2/chapter/9

See 61G (4) and (5)

I think that plays out depending on how time you spend abroad, whether your client has a U.K. connection etc etc, but may be a complex area.

For example if 80% of your working time was in a European country as an employee you would be expected to enrol in that country’s social security system

Whether HMRC can make a personal assessment on you as “ an employee” and resident in the U.K. I don’t know, but you may be afforded some protection by double tax treaties.

No to what? If your argument is that Chapter 9 doesn't create a new charge to tax then, er, yes, it doesn't do that. To pay UK tax, you must be chargeable to UK tax. It's also true that, if you have a foreign employer with no UK presence/PE, there is no ErNI, but that may or may not speak to your point above (I am struggling to decipher your point). Regardless, this has absolutely nothing to do with UK employment law. The hint is in the legislative vehicle, ITEPA, which is tax legislation.

[Chevalier]

No to what? If your argument is that Chapter 9 doesn't create a new charge to tax then, er, yes, it doesn't do that. To pay UK tax, you must be chargeable to UK tax. It's also true that, if you have a foreign employer with no UK presence/PE, there is no ErNI, but that may or may not speak to your point above (I am struggling to decipher your point). Regardless, this has absolutely nothing to do with UK employment law. The hint is in the legislative vehicle, ITEPA, which is tax legislation.

Yes you are right that Chapter 9 applies..

but my point is that the legislation specifically disapplies PAYE regulations in exactly the same way as if you are working for on overseas clients.

[jamesbrown]

Yes you are right that Chapter 9 applies..

but my point is that the legislation specifically disapplies PAYE regulations in exactly the same way as if you are working for on overseas clients.

The deemed payment still applies under Chapter 9 (and Chapter 8, incidentally) when working for a client that is based overseas. If, in addition, that client doesn't have a UK presence (an important qualification, because many overseas clients have a UK PE or branch office), then there is no charge to ErNI within the deemed payment because that charge wouldn't arise were you employed directly. Is that the point you're making or is it something else?

As an aside, there is no disapplication of the PAYE regulations when working for an overseas employer as such, it's just that there is a territorial limitation to PAYE, i.e., an overseas employer doesn't have to apply PAYE themselves if they have no UK tax presence, rather you need to apply PAYE as the employee using a PAYE direct scheme (e.g., DPNI with EeNI) or to elect self assessment. For the former, there is naturally no ErNI because of the territorial limitation on ErNI, so it's all aligned in that regard.

[Chevalier]

The deemed payment still applies under Chapter 9 (and Chapter 8, incidentally) when working for a client that is based overseas. If, in addition, that client doesn't have a UK presence (an important qualification, because many overseas clients have a UK PE or branch office), then there is no charge to ErNI within the deemed payment because that charge wouldn't arise were you employed directly. Is that the point you're making or is it something else?

As an aside, there is no disapplication of the PAYE regulations when working for an overseas employer as such, it's just that there is a territorial limitation to PAYE, i.e., an overseas employer doesn't have to apply PAYE themselves if they have no UK tax presence, rather you need to apply PAYE as the employee using a PAYE direct scheme (e.g., DPNI with EeNI) or to elect self assessment. For the former, there is naturally no ErNI because of the territorial limitation on ErNI, so it's all aligned in that regard.

Yes indeed. That’s one example.. Other examples might be PAYE/ social security arrangements when spending significant time abroad. In these examples the company won’t be liable.

In some cases HMRC will be limited from raising further assessments by double tax agreements (especially social security)

In others, judging by comments, HMRC don’t seem to be reading appeals. By the time they get round to issuing any personal discovery assessments, they may well have missed the boat!

[jamesbrown]

Yes indeed. That’s one example.. Other examples might be PAYE/ social security arrangements when spending significant time abroad. In these examples the company won’t be liable.

In some cases HMRC will be limited by double tax agreements (especially social security)

In others, judging by comments, HMRC don’t seem to be reading appeals. By the time they get round to issuing any personal discovery assessments, they may well have missed the boat!

OK, but that still has nothing to do with employment law, which is the point you seemingly disagreed with. The point I was making was no more complicated than that.

In calculating liabilities, there will always be edge cases (whether under the MSC deemed payment or IR35). The bigger picture is that the deemed payment calculation under Chapter 9 (MSC) is very much like the deemed payment calculation under Chapter 10 ("new IR35"), since the 5% for expenses you get under Chapter 8 ("old IR35") doesn't apply under Chapter 10. In short, a good estimate of the liability for the average person caught up in this is to plug your company turnover into an inside IR35 calculator (and then subtract the CT and dividend taxes already paid, although it may take a tribunal judge to rule on quantum because I doubt HMRC will freely accept that, initially).

[Chevalier]

OK, but that still has nothing to do with employment law, which is the point you seemingly disagreed with. The point I was making was no more complicated than that.

In calculating liabilities, there will always be edge cases (whether under the MSC deemed payment or IR35). The bigger picture is that the deemed payment calculation under Chapter 9 (MSC) is very much like the deemed payment calculation under Chapter 10 ("new IR35"), since the 5% for expenses you get under Chapter 8 ("old IR35") doesn't apply under Chapter 10. In short, a good estimate of the liability for the average person caught up in this is to plug your company turnover into an inside IR35 calculator (and then subtract the CT and dividend taxes already paid, although it may take a tribunal judge to rule on quantum because I doubt HMRC will freely accept that, initially).

I was actually responding to your comment about U.K. taxes applying to U.K. companies, but never mind. Should be clearer in future!