Churchill Knight & Boox clients being investigated as Managed Service Companies

[JB3000]

I haven't quite read the entire thread so forgive me if I go over old ground but it seems extremely surprising that Boox might be being investigated as a MSCP given that they are a professionally qualified and regulated firm of chartered accountants.

"The legislation provides a specific exemption for persons being MSC Providers (involved with a company) merely by virtue of providing legal or accountant services in a professional capacity. This specific exemption applies only to persons professionally qualified (or training for a professional qualification) regulated by a regulatory body." : ESM3515

I can't understand why HMRC would go after Boox as, on the face of it, it seems like a complete waste of time as they are professionally qualified/regulated and therefore have to uphold very high standards (or risk losing their professional licence to practise). In the unlikely event Boox ends up being classified as a MSCP then potentially all contractor accountancy firms are at risk (even the professionally qualified and regulated ones). If HMRC manage to get Boox, then this could potentially open up the flood gates for HMRC in terms of tax receipts and closing the tax gap.

HMRC would probably have more success if they just go after the unqualified firms of accountants that offer a standardized corporate product, e.g. an accountancy firm that sucks in clients from recruitment agencies, forces them into PSC's (without any consultation on umbrellas, sole trader, agency PAYE, etc), forces them onto the flat rate VAT scheme (without any consultation of whether or not they can use the standard VAT scheme, be unregistered, etc), forces them onto a standard national insurance salary (without any consultation on whether the contractor has other income and/or IR35 review), submits PAYE/VAT/CT without the director's approval, etc. In other words, the more the service is a bulk corporate solution/product controlled by the accountancy firm without the involvement of the director the more likely HMRC would have success (versus a tailored advisory service provided by a professionally qualified firm where the contractor is presented with all the options and remains in full control).

[GregRickshaw]

I haven't quite read the entire thread so forgive me if I go over old ground but it seems extremely surprising that Boox might be being investigated as a MSCP given that they are a professionally qualified and regulated firm of chartered accountants.

"The legislation provides a specific exemption for persons being MSC Providers (involved with a company) merely by virtue of providing legal or accountant services in a professional capacity. This specific exemption applies only to persons professionally qualified (or training for a professional qualification) regulated by a regulatory body." : ESM3515

I can't understand why HMRC would go after Boox as, on the face of it, it seems like a complete waste of time as they are professionally qualified/regulated and therefore have to uphold very high standards (or risk losing their professional licence to practise). In the unlikely event Boox ends up being classified as a MSCP then potentially all contractor accountancy firms are at risk (even the professionally qualified and regulated ones). If HMRC manage to get Boox, then this could potentially open up the flood gates for HMRC in terms of tax receipts and closing the tax gap.

HMRC would probably have more success if they just go after the unqualified firms of accountants that offer a standardized corporate product, e.g. an accountancy firm that sucks in clients from recruitment agencies, forces them into PSC's (without any consultation on umbrellas, sole trader, agency PAYE, etc), forces them onto the flat rate VAT scheme (without any consultation of whether or not they can use the standard VAT scheme, be unregistered, etc), forces them onto a standard national insurance salary (without any consultation on whether the contractor has other income and/or IR35 review), submits PAYE/VAT/CT without the director's approval, etc. In other words, the more the service is a bulk corporate solution/product controlled by the accountancy firm without the involvement of the director the more likely HMRC would have success (versus a tailored advisory service provided by a professionally qualified firm where the contractor is presented with all the options and remains in full control).

Excellent post and I am wondering now if this hangs more on professional qualifications then?

I don't remember seeing the word chartered anywhere around CK which is a clear difference between Boox

From my dealings (and others) they seem to sit somewhere in the middle, possibly towards the chartered end rather than the standardised version you describe, as CK really did none of the 'bad' things you mention.

I suspect CK are, after comparing them with what others do and what I know, more high tech bookkeepers than accountants? but I really don't know.

Thank you this is excellent food for thought.

[THEPUMA]

HMRC have always said this. But the legislation doesn’t. I remember debating it with Simon Dolan back in the very early days when the legislation was introduced, as I always thought unregulated firms were higher risk.

But remember HMRC’s guidance is not in any way binding. They could easily have included the requirement to be professionally regulated in the legislation and chose not to. So again, it will come down to the true meaning of the word professional and the intention of Parliament. And on balance, I think CK clients should win on this point alone. It would certainly be the focus of my defence if I were in their shoes.

[malvolio]

Don't forget, for an accountancy company to be regarded as professionally qualified, they only need one employee to have a chartered qualification. They don't even have to be in the team providing the accounting services...

[THEPUMA]

Don't forget, for an accountancy company to be regarded as professionally qualified, they only need one employee to have a chartered qualification. They don't even have to be in the team providing the accounting services...

What makes you say that?

[malvolio]

What makes you say that?

Conversations with various umbrella and accountancy providers over the years?

[THEPUMA]

Conversations with various umbrella and accountancy providers over the years?

Do you mean from an eligibility to be regulated by the ICAEW (or ACCA) perspective or do you mean from an MSC legislation perspective?

If the former, it’s pretty much irrelevant since the accountancy firms in question are either regulated or they’re not.

[Hareforthebear]

But remember HMRC’s guidance is not in any way binding. They could easily have included the requirement to be professionally regulated in the legislation and chose not to.

Good point. I was just looking again at the guidance now and it seems very muddled (and very recently updated… could not determine exactly what parts were updated), particularly where it talks about the accountancy exemption, and then goes on to provide examples where accountants are both simultaneously accountants and not accountants but actually MSCP - Schrodinger’s accountants.

Seems a pretty stretched interpretation of the legislation imo but what would I know. How on earth you could be expected to determine how to apply these and ‘do the right thing’ by HMRC is beyond my understanding.

[eek]

Do you mean from an eligibility to be regulated by the ICAEW (or ACCA) perspective or do you mean from an MSC legislation perspective?

If the former, it’s pretty much irrelevant since the accountancy firms in question are either regulated or they’re not.

The rules were explicitly designed because the easiest escape route for an MSC Provider would have been to employ an accountant and use the accountant escape route while continuing as before.

Its a shame I need to repeat this but the accountancy clause isn't a complete escape route - the law includes provisions to cover the point where an accountant exceeds their accountancy remit and moves into the territory of MSC Provision. And the problem is that the line between being an accountant and being an MSC may be scarily narrow.

[malvolio]

Do you mean from an eligibility to be regulated by the ICAEW (or ACCA) perspective or do you mean from an MSC legislation perspective?

If the former, it’s pretty much irrelevant since the accountancy firms in question are either regulated or they’re not.

Well I won't get into an argument about it. Fact remains, anyone can call themselves an accountant, but if you want to describe your service as "regulated" or "chartered" then someone somewhere in your organisation needs to be chartered to one of the accountancy bodies. Does that get let MSC's off the hook? Well I doubt it, but we will have to wait and see.