Churchill Knight & Boox clients being investigated as Managed Service Companies

[Bruce88]

I've always said that I lean towards HMRC losing this, although CK and Boox pinned a massive target on their backs through their terrible advertising surrounding "hands free" accountancy and "solutions", which absolutely screamed MSCP.

In terms of the arguments presented, I think those surrounding Condition C will be the hardest to defend, depending on the extent to which a tribunal judge takes a literal interpretation (arguably on the same trajectory as the CBS judgement). It is hard to argue that there was no influence over the payments made to the individuals if they have evidence of CK/Boox recommending or describing the merits of a particular approach to extracting funds (vs. all other approaches) and how best to achieve it (e.g., through distinct payments). It doesn't really matter whether this is a common approach among contractors more generally.

Under Condition D, there may be some reasonable arguments too, depending on whether the portal herded clients towards a particular approach or, instead, provided complete flexibility and allowed the client to make informed choices. It's clear that HMRC believes the former and it's difficult to tell who is correct (I cannot comment, as I have no experience of their portals, but HMRC are more likely to have a case if the underlying software is bespoke or otherwise configured in a way that limits/herds). There is a distinction here between a client asking for advice about tax efficiency and the alleged MSCP making upfront assumptions or herding clients towards a particular approach that looks like a "solution".

Overall, the arguments don't advance things much and they aren't very precise/convincing IMHO (and some of the weaker assertions detract from the overall argument), but they will improve and become more focused once a tax barrister gets involved. Still, I haven't changed my opinion that HMRC will lose, although I wouldn't stake much money on it.

Have to admit having received the updated version of the HMRC case, I believe their position looks weaker than I first thought. Regarding points c and d they are making no claim as to ‘control’ by Boox, instead only claiming ‘influence’. I realise that both ‘control’ and ‘influence’ are included in the legislation but ‘influence’ is a weaker argument than ‘control’. Especially as the HMRC have yet to explain why the accountancy clause has not been applied, because where do you draw the line between accountancy advice and influence.

Regards point c, I engaged the services of a charted accountant in Boox predominately to ensure that I comply with all tax legislation and my returns are completed correctly and on time. But also to advise on tax efficiency i.e. pay the legal minimum amount of tax, I don’t believe there is anything wrong or illegal about that approach. With that in mind, the advice I receive from an accountant will be on how to minimize my tax bill. Again I’m not sure how HMRC can make a clear distinction between normal accountancy advice and influence.

Regards point d and specifically the portal, the Boox software allows you to set any salary figure you can afford to pay. You could set it above £50K and pay 40% income tax if you wish, there are no restrictions built into it. The software would calculate the correct amounts of tax and NI due regardless. There have been times when I have suggested or indeed paid salaries which have incurred PAYE liabilities, BOOX have never objected.

[jamesbrown]

Especially as the HMRC have yet to explain why the accountancy clause has not been applied, because where do you draw the line between accountancy advice and influence.

The thing to bear in mind with 61B(3) is that it doesn't say accountants operating in a professional capacity are exempt, rather that they are not automatically caught. This points to case law determining the line between an accountant operating in a professional capacity and an MSCP. In summary, I don't think there's much comfort in 61B(3) and, in any case, it isn't for HMRC to look for reasons to disapply the legislation, rather to look for reasons to apply it. Again, there's an important distinction between a client seeking advice from an accountant and an accountant who proactively offers advice that favours a low salary/high dividend approach. I have no idea (beyond what I've read here) whether CK/Boox made assumptions or suggestions that pointed towards a low salary/high dividend approach but, honestly, there's probably an indistinct line between these things, which is why I think Condition C is more challenging.

Regarding what you've said about Condition D, I personally never bought the portal argument as being particularly strong, but HMRC clearly sees this as central to their case (it isn't a coincidence that they chose CK and Boox in this regard). If the portal operated much like a more general purpose bookkeeping tool (e.g., Xero or FA), with no significant configuration or restrictions on default functionality, I think they are left with the much weaker argument in relation to Condition D that "There is no independence from the portal". I doubt that is enough because there obviously needs to be a mechanism to share information when an accountant is operating in a professional capacity and a portal doesn't really tie hands in that regard (any more than a relationship with a local accountant sharing paper would tie hands), it simply facilitates information sharing.

[geekergosum]

I'm caught up with Boox, and waiting for my latest letters...but based on the comments below the point I have with HMRC is only reinforced.

On Condition A:

I chose Boox so I had an easy and convenient portal with which to operate my business and ensure that all tax was calculated both correctly and efficiently. I relied upon a professional accountant to give a service I lacked the knowledge in, just as my end clients chose me to provide a service.

By using a service I expect to pay for it. If I don't pay for it I don't get it...what is true for Boox is true for Netflix, or the TV licence, or My Broadband. I pay even if I didn't use it.

Condition C:

I asked for the best way to pay my tax, and the advice from Boox was the same as a cursory Google Search. At no point did they say 'you must' and at best it was 'you could'. The end decision with me was my own.

Again HMRC need to check the law...High Tax Avoidance through tax planning does not equal Tax Evasion, and it apparently my fiduciary duty my company's Shareholders to pay the least amount of tax owed:

https://www.theguardian.com/technolo...change-law-tax

On the three separate payments...is HMRC saying making it easier to do your accounts is bad?

Condition D:

The use of the portal was to simplify the process, like using Excel instead of a calculator and some graph paper for the data analysis. It wasn't 'control', it was a 'tool'.

There was independence, I used to send a CSV of my business bank account so they could make up the accounts. I could have sent my own invoices but would have had to have provided them for them to do the bookkeeping. If I had used some formulas in Excel via a blogpost on how to have run a low salary/high dividend model would I be an Employee of Microsoft and BackstreetAccountants.com?

This makes me think the HMRC attack is more flimsy than ever, and are relying on overly aggressive techniques rather than anything based on real work accounting.

[GregRickshaw]

I think HMRC finally found the YouTube video posted months ago here.

[rdw1970]

I think HMRC finally found the YouTube video posted months ago here.

I doubt it as Boox removed it along with all their social media accounts long before they folded

[GregRickshaw]

Well with the speed HMRC move they probably found it and have only now started acting.

[jimmyoyang]

My understanding is you will need to claim back CT however there is a limit to how far back you can go, which causes some issues. I know DK group put in conditional claims for CT so the claim is in on time.

Yeah, I've already applied for this and received a letter back saying my claim was noted but nothing will be actioned until the Regulation 80 Determination is finalised. Once finalised, I would then need to make the claim for the overpayment. There was no talk or information about time limits (other than them noting about the investigation... this is from the CT department not MSC) – and since this was a generic response, I presume we all received something similar? Basically, however long this case takes... we can only apply for a refund after the case is closed (meaning the timeframe/deadline is redundant, surely).

[Bruce88]

Some further points to add regarding the updated HMRC case

Regards condition a

‘If clients fail to pay then access to the online portal is suspended’

This is incorrect I have on more than one occasion had trouble with payments going through to Boox. Normally a quick phone call or email and the issue is sorted. At no point has access to the portal ever been suspended.

‘Clients must continue to pay BOOX regardless of whether they are receiving income’

I continue to pay Boox during periods when no income is received because my company is still an ongoing concern which requires the services of an accountant to meet statutory submissions to HMRC. This includes quarterly VAT returns, EoY accounts, corporation tax returns, RTI submissions, as well has having an accountant available for general accounting enquiries. This points to me paying Boox for their service not them benefiting financially from the provision of my services.

Regards condition d

‘BOOX influence the company’s finances or any of its activities by influencing the choice of bank account used by the client companies. Without choosing a certain bank account, BOOX’s product wouldn’t work as intended and the individual client companies would have to complete additional admin tasks’

Boox have never made any conditions as to which bank account I should use. In fact, a few years ago I changed my bank account to a new fintech start-up bank, at no point did Boox ever say this was a problem or incompatible with their systems.

[DealorNoDeal]

It was mentioned a while ago that CK were raising a fighting fund. How did this go in the end, did they reach target?

What about Boox? What are they doing to fight this?

Anyone know if the CK & Boox tribunal cases will be heard together, or separately?

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I genuinely feel sorry for anyone caught up in this because it's probably going to drag on for many years.

Try not to let it consume your life.

[Lotok]

It was mentioned a while ago that CK were raising a fighting fund. How did this go in the end, did they reach target?

What about Boox? What are they doing to fight this?

Anyone know if the CK & Boox tribunal cases will be heard together, or separately?

----------------

I genuinely feel sorry for anyone caught up in this because it's probably going to drag on for many years.

Try not to let it consume your life.

I don't expect much from Boox