Churchill Knight & Boox clients being investigated as Managed Service Companies

[Bruce88]

The other way, I have read on here and there are some very good details responses on this post, is to pay less the 50% of your income out of your company, that is horribly paraphrased so have a search through this forum and this post for the better detail.

This is the argument that I am now having with the HMRC.

My personal income taken from my limited company is significantly below 50% of turnover. However the HMRC have stated that they believe employer pension contributions constitute indirect payments to the individual, which conveniently for them takes me just over the 50% threshold. This I strongly disagree with, as contributions are made directly from the business account to an approved pension scheme and held by the trustees of the scheme until such time as I retire. At that point a payment is made to the individual which the HMRC recognise as this is when the appropriate tax is applied.

It seems to me to be another case of the HMRC applying their own interpretation to legislation.

[GregRickshaw]

I expect some of those that they're getting around to eliminating now we not actually clients of CK or Boox during the tax years in question, but were on their books in earlier or later years. Remember, all these Reg 80 determinations were rushed out to meet a deadline and it's easier for HMRC to capture absolutely everyone with even the slightest chance of a potential liability, initially, and then to de-blunder later.

Those ones seemed to be thrown out quicker than the consultancy ones. I definitely agree the rush to get the letters out and a fire and forget policy from HMRC caught a lot who should never have been caught. This time though I do think a few appeals have worked, maybe CK's own appeals or MPs or groups who knows.

However it does appear to be HMRC clearing the wood from the trees.

It's still a good thing though.

[s684]

This isn't going to be the "silver bullet" HMRC were after if it starts to become fact specific and depend on individual circumstances (like IR35!).

[Guy Incognito]

This is the argument that I am now having with the HMRC.

My personal income taken from my limited company is significantly below 50% of turnover. However the HMRC have stated that they believe employer pension contributions constitute indirect payments to the individual, which conveniently for them takes me just over the 50% threshold. This I strongly disagree with, as contributions are made directly from the business account to an approved pension scheme and held by the trustees of the scheme until such time as I retire. At that point a payment is made to the individual which the HMRC recognise as this is when the appropriate tax is applied.

It seems to me to be another case of the HMRC applying their own interpretation to legislation.

This is a MAJOR issue for me as I used a lot of carry forward in those years.

The Boox App did not have the ability to set pension contributions, so that is a strong argument for not being involved with the company imo.

[jamesbrown]

This isn't going to be the "silver bullet" HMRC were after if it starts to become fact specific and depend on individual circumstances (like IR35!).

Not individual circumstances, but also not the superset of all CK and Boox clients. It's still way, way easier for HMRC to aggregate similar behaviours under Chapter 9 than Chapter 8 or even Chapter 10 because IR35 relies on individual working practices, which are necessarily variable, whereas Chapter 9 hinges on behaviours that "involve" a MSCP in an MSC and these behaviours are relatively easy to aggregate. In short, they will end up with tribunal cases which, if they win, will impact a large number of CK and Boox clients, among others.

[s684]

Not individual circumstances, but also not the superset of all CK and Boox clients. It's still way, way easier for HMRC to aggregate similar behaviours under Chapter 9 than Chapter 8 or even Chapter 10 because IR35 relies on individual working practices, which are necessarily variable, whereas Chapter 9 hinges on behaviours that "involve" a MSCP in an MSC and these behaviours are relatively easy to aggregate. In short, they will end up with tribunal cases which, if they win, will impact a large number of CK and Boox clients, among others.

Thanks, you clearly know your stuff.

I wonder who came up with the idea of using Costelloe as a spring board for going after CK/Boox? Was it some "bright sparks" in HMRC or, as is often the case, external tax barristers. That could make a big difference as to how well founded the case against CK/Boox really is.

Anyway, it will be an interesting case to follow.

[eek]

Thanks, you clearly know your stuff.

I wonder who came up with the idea of using Costelloe as a spring board for going after CK/Boox? Was it some "bright sparks" in HMRC or, as is often the case, external tax barristers. That could make a big difference as to how well founded the case against CK/Boox really is.

Anyway, it will be an interesting case to follow.

external tax barristers don't go pointing things out to HMRC.

HMRC decided to do this as it takes them to their desired end point of no contractors using limited companies. This doesn't get them that far but it gets them into a position to choice more contractor accountancy firms if they win...

[s684]

external tax barristers don't go pointing things out to HMRC.

HMRC regularly outsource research to external barristers. Many strategies/counter-avoidance measures were not devised by HMRC but by barristers. For example, HMRC didn't come up with the 2008 double tax retrospective legislation themselves, nor s684.

They may not have done that in this case but it wouldn't be unusual if they had.

[jamesbrown]

Thanks, you clearly know your stuff.

I wonder who came up with the idea of using Costelloe as a spring board for going after CK/Boox? Was it some "bright sparks" in HMRC or, as is often the case, external tax barristers. That could make a big difference as to how well founded the case against CK/Boox really is.

Anyway, it will be an interesting case to follow.

I expect that HMRC couldn't believe their luck when they read the CBS judgement. Admittedly, it was a very straightforward case for HMRC to win, but the scope for building on that case and extending it to a far wider population of traditional contractors was really only revealed in the judgement itself. In short, it didn't require a galaxy brain for HMRC to see the opportunity in front of them and to plot out their next steps.

[s684]

The CBS decision became final on 3 Dec 2019 when the Supreme Court refused permission to appeal, although HMRC would have been highly confident of victory long before then.

https://www.gov.uk/government/public...-contributions

It looks like it took HMRC over 2 years after that before launching a full-on attack against CK/Boox, so maybe it was far from obvious.

For those affected by this, my hope is that HMRC are chancing their arm, seeing how far they can push it. Sadly though I have little faith in the tribunals/courts who seem all too willing to do HMRC's bidding.