Churchill Knight & Boox clients being investigated as Managed Service Companies

[cojak]

Ok Greg. This looks like a subset of ‘In Business on Your Own Account’.

While CK are looking like they’ve got questions to answer, it looks as if you have solid answers to those questions.

So organise your folder with EVERYTHING that shows that you are a businessman. Dig out all correspondence for organising your Ltd, Vat and everything else (digital and paper) that shows that you set up and run the LTd on your own. Make sure that those answers are given to your tax advisor and your MP.

View this as a form of IR35 investigation - HMRC are wrong in your circumstances and a good defence will get you out of this.

This post applies to you too If you have the same answers that Greg has.

Do not think that all contractors should or will be tarred with the same brush.

This is NOT the same as the Loan Charge - I believe that this is the same as an IR35 investigation.

[eek]

This sheds some light on things https://www.gov.uk/government/public...-contributions

The liability is in some ways better as both the company, the company’s directors, CK and CK’s directors are jointly and severely liable.

[malvolio]

This sheds some light on things https://www.gov.uk/government/public...-contributions

The liability is in some ways better as both the company, the company’s directors, CK and CK’s directors are jointly and severely liable.

With the caveat that they say "If any part of the tax and National Insurance contributions are irrecoverable,...", which is fairly significant since earlier they are clear that the worker is primary target for repayment.

[jamesbrown]

CK are the tip of a huge iceberg here, if Hector win this it will be easier to count how many people who are NOT facing huge tax bills.
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I am looking into transferring ownership of my house to my partner

I think you are getting way ahead of yourself here and your judgement may be clouded by other experiences (were you involved in other avoidance schemes?). As far as precedent goes, Costelloe Business Services were not offering anything remotely like ordinary accountancy services.

I think CK have probably shot themselves in the foot with their marketing material but, ultimately, if they offered ordinary accounting services and that is all you procured from them, I don't see a strong case here.

Yes, there is a line to probe, and if CK's marketing material is closer to the truth about what happened, then there is a problem. Accountancy services that are highly automated or packaged in a way that the client barely participates or is not clearly in control of the company and its finances will be a problem. The CK case will probe that line, I am sure but, notwithstanding their marketing material and what we don't know, your argument that you received ordinary accounting services if probably correct.

[eek]

Reading https://www.bailii.org/uk/cases/UKFT...6/TC05045.html and https://www.bailii.org/uk/cases/UKUT/TCC/2018/10.pdf which is the first and upper tribunal there are a lot of differences between what happened there and what CK are doing.

because to be clear

CBS was managing the bank accounts
CBS were factoring the invoices so invoices came from / went to CBS first.

neither of which is true of CK.

in fact reading those 2 items it’s almost like HMRC are targeting something as stupid as say CK prepopulating a value in the April 2017 payslip because I can’t see which other points the tribunal based its decision that CK would fail on.

but their hands off marketing campaign does them zero favours - mind you 95% of all marketing to contractors makes me wince for similar reasons.

[mudskipper]

Get your MP involved as soon as you can. I'm going for a settlement amount (will advise the % amount when I can but expect at least 60%) . Yeah when they win... and as someone pointed out Hector only goes back to CK after Ltd company, then director (us)... so they have very little to lose.

I have also now cut all ties with CK.

In our defence (which won't stand up in court) how on earth were we supposed to know this was illegal?
I admit the loan charge stuff smelt a little bit 'off' but nothing about CK being our accountants felt off at all.

IR35 is a tough beast and more changes to come even to small to medium firms, not sure a smaller accountant makes a difference just make sure they operate within the law.

If you don't already have IPSE/QDOS cover, talk to Merkel and see if they offer a paid for service. You definitely need specialist representation. If what you have told us is correct, then you are not an MSC and have done nothing wrong, and it should be a straightforward matter for someone with the expertise to prove that.

[mudskipper]

Well this is ironic

https://www.churchill-knight.co.uk/w...170313-RB5.pdf

[eek]

Well this is ironic

https://www.churchill-knight.co.uk/w...170313-RB5.pdf

Posted already in post 24..

but I wouldn’t go as far as saying this is a straightforward case of a misunderstanding. Re-reading the first and upper tribunals I linked to earlier, an accountant automatically running RTI submissions designed to only pay a tax minimising salary seems to be enough to fall foul of the rules..

[jamesbrown]

I wouldn’t go as far as saying this is a straightforward case of a misunderstanding. Re-reading the first and upper tribunals I linked to earlier, an accountant automatically running RTI submissions designed to only pay a tax minimising salary seems to be enough to fall foul of the rules..

I don't see this myself. I also read the CBS FTT and UT judgements and this was as clear a case of being caught by the MSC legislation as you are likely to get. The MSCP, CBS, created hundreds of off-the-shelf companies awaiting clients, marketed them to clients as a preferred/packaged solution, handled all of the administration including the withholding and payment of taxes, set the salary and paid the rest as dividends (without the client company creating any dividend paperwork or deciding what the amounts should be), received a fee for each invoice, factored invoices etc. etc. etc. etc. They were plainly breaching most of the five conditions that govern "involvement" of the MSCP in the MSCs and there was also no argument that CBS was not an MSCP (that was already accepted in the FTT, although CBS tried to backtrack).

Nothing about submitting tax returns on behalf of a client falls within the definition of "involved". Nothing about providing tax advice and the client being free to accept that advice and instruct the accountant accordingly falls within the definition of "involved". Insofar as there is a grey line, where the payroll is hidden by the accountant and managed on behalf of the client with little/no client input or approval, then I think you would still be missing 99% of the factors present in the CBS case. The idea that an accountant setting up and submitting payroll for a client via Xero or FA or some other book keeping software, according to the client's instructions, would be "caught" is wide of the mark, I think.

[eek]

I don't see this myself. I also read the CBS FTT and UT judgements and this was as clear a case of being caught by the MSC legislation as you are likely to get. The MSCP, CBS, created hundreds of off-the-shelf companies awaiting clients, marketed them to clients as a preferred/packaged solution, handled all of the administration including the withholding and payment of taxes, set the salary and paid the rest as dividends (without the client company creating any dividend paperwork or deciding what the amounts should be), received a fee for each invoice, factored invoices etc. etc. etc. etc. They were plainly breaching most of the five conditions that govern "involvement" of the MSCP in the MSCs and there was also no argument that CBS was not an MSCP (that was already accepted in the FTT, although CBS tried to backtrack).

Nothing about submitting tax returns on behalf of a client falls within the definition of "involved". Nothing about providing tax advice and the client being free to accept that advice and instruct the accountant accordingly falls within the definition of "involved". Insofar as there is a grey line, where the payroll is hidden by the accountant and managed on behalf of the client with little/no client input or approval, then I think you would still be missing 99% of the factors present in the CBS case. The idea that an accountant setting up and submitting payroll for a client via Xero or FA or some other book keeping software, according to the client's instructions, would be "caught" is wide of the mark, I think.

Oh I suspect you are not quite reading them the way I am - I’m looking at the whole but also at the individual parts where the tribunals are saying “here’s a problem” and then working out if CK could be caught by it.

Now there are a whole set of incredibly stupid ways in which CBS utterly broke nearly every part of the MSC rules but when it comes to payroll it is the one clear area where CK and CBS are operating a similar approach at which paragraph 88 and items 6, 7 and 8 of paragraph 91 (page 46-47) of the UTT may be very important

now it’s incredibly tenuous (because it really shouldn’t be enough in itself to go from independent company to MSC) and I really don’t like my thought process but I can see enough in there, that were CK to be using a default value for salary without explicit instructions, HMRC could think there may be a case worth playing with..

And remember that for years we’ve had multiple conversations on what is the best rate of salary a contractor should be taking but I suspect most people don’t send their accountant instructions or pay any attention, they just let their accountant use their default figures and get on with it.

as for Xero and FA remember my very first point that using those may be enough in itself to avoid this nightmare. I don’t know about Xero but I know I physically need to put my wage into Freeagent before it does anything