Churchill Knight & Boox clients being investigated as Managed Service Companies

[mogga71]

Another edge case is the following. For the period under investigation, the MSC may pay out less than 50% of the fees to the worker(s). However, the goal, presumably, is that the remaining amounts are paid out eventually. At that point, the PSC may become an MSC if all other conditions are met because there is no particular timeframe in the legislation over which the qualifying conditions must be met. Thus, any payment made later on, including a payment made on winding up, would potentially trigger the legislation if 61B(1)(b) was the only condition not met previously.

Am I missing something here? How can it mention payments made on winding up? We now know that any closed companies are out of scope for the MSCP investigations ... don't we?

[jamesbrown]

Am I missing something here? How can it mention payments made on winding up? We now know that any closed companies are out of scope for the MSCP investigations ... don't we?

Any winding up needs to be approved by HMRC before the company is closed. Separately, for companies that were already closed, all we’ve seen is that HMRC are not pursuing them, but they could, in principle. The point is that it’s much harder once closed and HMRC are not going to approve a closure of any company caught up in this…

[Bruce88]

Hi, new here. I was with Boox and received my notification last week for years 2018/19 and 2019/20. Came as a bit of a shock and I’ve been trying to get my head round this situation since. I found this thread and must say there are some excellent contributions which really helped me get up to speed.

One question I have, when I took Boox on as my accountant, I signed a HMRC form 64-8 which authorized Boox to act as my agent. The form gives options for CT, VAT, PAYE. The HMRC website states

‘Use the 'Authorising your agent (64-8)' form to tell HMRC that you give authorisation for someone to act on your behalf for individual or business tax affairs’

Their own rules allow for an accountant to be directly involved in the tax affairs of a business and to be the point of contact for the HMRC.
Does this not undermine their case?

[jamesbrown]

Does this not undermine their case?

No, it's entirely neutral. As indicated in the legislation, a PSC is not assumed to be an MSC merely because it pays for the services of an accountant in a professional capacity. All that form does is to authorise an agent to act on YourCo's behalf. Whether that accountant is "involved with" YourCo for the purposes of ITEPA Ch. 9 is a completely separate question. Some alleged MSCPs will be "involved with" some or all of their clients, others will not, but all need authorisation to deal with HMRC on behalf of YourCo.

[Bruce88]

OK, thanks for the response. I know it will come down to what can be proven by the letter of the law, but it seems like a ridiculous 'splitting of hairs'. If the HMRC recognises that a business requires an 'agent' to take care of its affairs, they can't be anything but involved in your business! And an agent will represent the best interests of the business. Surely the acid test is 'control' of a business not 'involvement'. Trying to differentiate between 'involvement' and 'providing a service' is again splitting hairs in my opinion.

[jamesbrown]

OK, thanks for the response. I know it will come down to what can be proven by the letter of the law, but it seems like a ridiculous 'splitting of hairs'. If the HMRC recognises that a business requires an 'agent' to take care of its affairs, they can't be anything but involved in your business! And an agent will represent the best interests of the business. Surely the acid test is 'control' of a business not 'involvement'. Trying to differentiate between 'involvement' and 'providing a service' is again splitting hairs in my opinion.

Well, they can, because the Ch. 9 defines what is meant by "involved with" and, as it states, merely providing accountancy services is not enough.

Bottom line, if you can evidence control by deciding on salary and dividend levels and making day-to-day decisions and not doing anything obviously stupid (like getting IR35 etc. insurance via your accountant), then the provider was probably not "involved with" YourCo.

Whether you call it splitting hairs or not is a matter of perspective, I suppose, but there's an awful lot of "splitting hairs" throughout our tax legislation, Ch. 8 and Ch. 10 included! To a large extent, it's an artifact of our common law system because "hair splitting" is the BAU of upper tier tribunals and courts who make case law.

[nekro]

Did anyone here get contacted by <mod snip> (HMRC) in June 2019 asking them for a F2F or telephone interview about their relationship with Boox? I did, but I declined an interview. I was advised to complete a list of questions instead which I received via post.

[Lotok]

Interesting, never had that.

[GregRickshaw]

Did anyone here get contacted by <mod snip> (HMRC) in June 2019 asking them for a F2F or telephone interview about their relationship with Boox? I did, but I declined an interview. I was advised to complete a list of questions instead which I received via post.

I believe some CK clients were asked the same, which pretty much gave HMRC what they wanted.

Those who were/are with CK will remember the words in the determination letters well... "after speaking with clients.."

[Bruce88]

Just looking for a bit of guidance on the initial appeal, if someone could help?

I received my notification letter from the HMRC dated 22nd November, but I haven't yet received my determination of tax owed. In the meantime, I am drafting my appeal and gathering relevant evidence that I operated as an independent PSC. I haven't had a chance to see any template appeals yet. Just wondering what level of detail to go into on the first appeal? Is better to go in with as much detail as possible with as much evidence as you can muster? Or is it more a case of keep the initial appeal fairly basic with a view to producing evidence at a later review stage?

I'm asking this question, because I understand the initial appeals are being stood over, without really being looked at in detail by HMRC. I imagine they are being left on file to be reviewed pending the outcome of the first FTT, after which the HMRC will contact you with regard to renewing your appeal and producing further evidence to back your claim?

I say this because of a previous occasion when I had dealings with the HMRC. Although I ended up in the clear, the conclusion I came to was that it was better to only produce very specific evidence, and only after it was requested.