Churchill Knight & Boox clients being investigated as Managed Service Companies

[DealorNoDeal]

+1 - the whole purpose of the legislation is to remove the MSC/limited company from the equation and treat all the money received as personal income subject to PAYE.

Which worked 100% with all the CBS users. But perhaps not so clinically with all CK and Boox clients.

[DealorNoDeal]

BTW, I could see HMRC asking Parliament to amend the MSC legislation, to widen its scope, at some point. (Especially if they lose the CK/Boox cases of course )

[Chevalier]

David Kirk certainly agrees that it is the payments made that matter and not the amount invoiced.

HMRC seem to be confused (at least by my interpretation) of what measure to take and when

Another example is the definition of what a Managed Service Company is - specifically 61B 1 (c)

HMRCs take on this point is that if the amounts received are greater than if these payments from the supposed MSC were employment income. - which in pretty much every case this would be true.

However this isnt what the legislation actually says.

"(c) the way in which those payments are made would result in the individual (or associates) receiving payments of an amount (net of tax and national insurance) exceeding that which would be received (net of tax and national insurance) if every payment in respect of the services were employment income of the individual, and"


This was summarised in the CoA judgement as follows :-

"8. Thus, an MSC is a company which (i) provides the services of an individual to others; (ii) pays that individual all or most of the fees it charges to those others; (iii) pays the individual in a way which increases the net amount received by the individual, as compared with what he would have received net if he had earned the fees as his employment income; and (iv) involves an MSC provider in its business in one of the ways then set out in section 61B(2)."

So in this instance it would appear that the test is the fees as employment income vs whats been received and not what was paid out as employment income vs whats been received.

That may also mean that more companies are not actually MSCs. Thoughts?

[GregRickshaw]

"8. Thus, an MSC is a company which (i) provides the services of an individual to others; (ii) pays that individual all or most of the fees it charges to those others; (iii) pays the individual in a way which increases the net amount received by the individual, as compared with what he would have received net if he had earned the fees as his employment income; and (iv) involves an MSC provider in its business in one of the ways then set out in section 61B(2)."

So in this instance it would appear that the test is the fees as employment income vs whats been received and not what was paid out as employment income vs whats been received.

That may also mean that more companies are not actually MSCs. Thoughts?

Which, I would imagine, is the way 98% of PSC/Contractor LTDs worked/work. So most must be guilty of i, ii, and iii.

iv is the mess in all of this.

[jamesbrown]

HMRC seem to be confused (at least by my interpretation) of what measure to take and when

Another example is the definition of what a Managed Service Company is - specifically 61B 1 (c)

HMRCs take on this point is that if the amounts received are greater than if these payments from the supposed MSC were employment income. - which in pretty much every case this would be true.

However this isnt what the legislation actually says.

"(c) the way in which those payments are made would result in the individual (or associates) receiving payments of an amount (net of tax and national insurance) exceeding that which would be received (net of tax and national insurance) if every payment in respect of the services were employment income of the individual, and"


This was summarised in the CoA judgement as follows :-

"8. Thus, an MSC is a company which (i) provides the services of an individual to others; (ii) pays that individual all or most of the fees it charges to those others; (iii) pays the individual in a way which increases the net amount received by the individual, as compared with what he would have received net if he had earned the fees as his employment income; and (iv) involves an MSC provider in its business in one of the ways then set out in section 61B(2)."

So in this instance it would appear that the test is the fees as employment income vs whats been received and not what was paid out as employment income vs whats been received.

That may also mean that more companies are not actually MSCs. Thoughts?

I think your CoA excerpt is a bit clumsy in that regard since the legislation speaks in terms of payments made (61(B)(1)(c)), not fees charged (as you correctly quoted). I think 61B(1)(a) and (c) will be met by default for any PSC that is making dividend payments, rather than salary payments. Conversely, 61B(1)(b) will not be met by a lot of PSCs (payments made are less than the greater part of the fees charged) and 61B(1)(d) is the crux of any tribunal/court case.

[GregRickshaw]

So there has to be a P to make a company an MSC? Seems like an MSC is defined by the three points AND the P in all of this.

There's a loophole to be closed I now really believe that is what all this is about, changing the policy about there having to be a P .... wow

[jamesbrown]

So there has to be a P to make a company an MSC? Seems like an MSC is defined by the three points AND the P in all of this.

There's a loophole to be closed I now really believe that is what all this is about, changing the policy about there having to be a P .... wow

There must be an MSCP, yes, and the MSCP must be "involved with" the MSC for the company to be an MSC, that is the fourth condition under 61B(1) that defines an MSC, 61(B)(1)(d).

[Chevalier]

I think your CoA excerpt is a bit clumsy in that regard since the legislation speaks in terms of payments made (61(B)(1)(c)), not fees charged (as you correctly quoted). I think 61B(1)(a) and (c) will be met by default for any PSC that is making dividend payments, rather than salary payments. Conversely, 61B(1)(b) will not be met by a lot of PSCs (payments made are less than the greater part of the fees charged) and 61B(1)(d) is the crux of any tribunal/court case.

Would have said the other way round

the legislation mentions services to other persons, payments to the individual and payments in respect of services..which could lead to misinterpretation.

the CoA summarises and clarifies

and surely a lower court has to follow this?

[jamesbrown]

Would have said the other way round

the legislation mentions services to other persons, payments to the individual and payments in respect of services..which could lead to misinterpretation.

the CoA summarises and clarifies

and surely a lower court has to follow this?

I don't think 61B(1)(c) could be much clearer.

the way in which those payments are made would result in the individual (or associates) receiving payments of an amount (net of tax and national insurance) exceeding that which would be received (net of tax and national insurance) if every payment in respect of the services were employment income of the individual, and

The payments here are clearly made from the MSC to the worker and the whole of 61B(1) speaks of payments in this context, using "consideration for the provision of the services" to mean payments from the client to the MSC.

[Chevalier]

I don't think 61B(1)(c) could be much clearer.



The payments here are clearly made from the MSC to the worker and the whole of 61B(1) speaks of payments in this context, using "consideration for the provision of the services" to mean payments from the client to the MSC.

So we agree that its the clients payment as income, which means the proportion paid can be much higher than 50% (depending on the quantum) and still not be an MSC.