Churchill Knight & Boox clients being investigated as Managed Service Companies

[gikap]

In case i was leaving money on a company account ie. 50% of yearly profits, is HMRC also going to calculate how much money i can take out of my company accounts for a particular tax year after i pay amount demanded (less CT, DT etc.) if company's entire yearly gross income is now considered PAYE?

[jamesbrown]

In case i was leaving money on a company account ie. 50% of yearly profits, is HMRC also going to calculate how much money i can take out of my company accounts for a particular tax year after i pay amount demanded (less CT, DT etc.) if company's entire yearly gross income is now considered PAYE?

Well, to begin with, YourCo cannot be an MSC unless you paid out half or more of the invoiced amounts (over an extended period, not necessarily in a given tax year). Second, as discussed earlier in this thread, the amount subject to PAYE and NICs is the amount paid out.

[gikap]

Well, to begin with, YourCo cannot be an MSC unless you paid out half or more of the invoiced amounts (over an extended period, not necessarily in a given tax year). Second, as discussed earlier in this thread, the amount subject to PAYE and NICs is the amount paid out.

In this post here you said the amount subject to PAYE and NICs is the amount company earned in a tax year, not amount paid out ie. paid to me.

Also, for a year i received determinations i took out (salary + dividends) considerably less than 50%, 42% of gross yearly income to be exact, and i still received brown letter. I don't think HMRC is consistent with their (made up) rules.

[antuk]

Well, to begin with, YourCo cannot be an MSC unless you paid out half or more of the invoiced amounts (over an extended period, not necessarily in a given tax year). Second, as discussed earlier in this thread, the amount subject to PAYE and NICs is the amount paid out.

Well Im considerably under 50%, caught up in this and HMRC have declined to dismiss my case with the 50% argument. So I hope your right, but they aren't playing ball right now

[jamesbrown]

In this post here you said the amount subject to PAYE and NICs is the amount company earned in a tax year, not amount paid out ie. paid to me.

Also, for a year i received determinations i took out (salary + dividends) considerably less than 50%, 42% of gross yearly income to be exact, and i still received brown letter. I don't think HMRC is consistent with their (made up) rules.

Apologies, I shouldn't have said "former". Again, this has been discussed to death much earlier in the thread. It's the amount that was paid out.

[jamesbrown]

Well Im considerably under 50%, caught up in this and HMRC have declined to dismiss my case with the 50% argument. So I hope your right, but they aren't playing ball right now

The legislation and HMRC strategy are quite often two different things. Whether they accept your argument now or are forced to accept it later, the legislation is quite clear about the threshold.

[antuk]

The legislation and HMRC strategy are quite often two different things. Whether they accept your argument now or are forced to accept it later, the legislation is quite clear about the threshold.

When you say extended period, who gets to determine the period? The covid year messes up the average, but if you exclude that year im golden.

[jamesbrown]

When you say extended period, who gets to determine the period? The covid year messes up the average, but if you exclude that year im golden.

Unclear (to me, at least). The legislation is silent about the calculation, but the ESM talks about a cumulative comparison and provides an example.

https://www.gov.uk/hmrc-internal-man...manual/esm3510

Anyway, unless you're clearly and consistently under 50%, it will probably be a fight.

[antuk]

Unclear (to me, at least). The legislation is silent about the calculation, but the ESM talks about a cumulative comparison and provides an example.

https://www.gov.uk/hmrc-internal-man...manual/esm3510

Anyway, unless you're clearly and consistently under 50%, it will probably be a fight.

Thanks....

If I go back two years before the 2017 year in question (to when the company started), the average over the 5 years (to the end of the 3 year period in question) is 50%. Just looking at three years in question the average is 46%, it only goes above 50 if you add in the covid years which are currently out of scope of the letters

[jamesbrown]

Thanks....

If I go back two years before the 2017 year in question (to when the company started), the average over the 5 years (to the end of the 3 year period in question) is 50%. Just looking at three years in question the average is 46%, it only goes above 50 if you add in the covid years which are currently out of scope of the letters

The three year period seems like a reasonable basis to me - afterall, it's the period in question and it's a long, cumulative basis. I expect you'll be cleared, but you'll have to live with the uncertainty until then, I'm afraid.