Churchill Knight & Boox clients being investigated as Managed Service Companies

[GregRickshaw]

Just been following this thread with interest and sorry to hear everyone who is mixed up in this mess.
My take is that CK and Boox must have been having conversations with HMRC for quite some time on this. I saw an earlier post that someone wasn't able to close their company in 2019 but I take it that both companies didn't share this with their clients until the letters were dropping. HMRC must have given them word that they were coming so they could inform their clients.

Three years apparently. Had they told us then an investigation was just starting, neither of them would be in business now as we would all have left.

[difficulttimes]

Three years apparently. Had they told us then an investigation was just starting, neither of them would be in business now as we would all have left.

So in 3 years the best arguments they could come up with were the ones mentioned above?? Those flimsy arguments could have been drafted in 5 minutes! I reckon originally there must have been more to this but maybe after digging there was nothing but after investing 3 years of resources they carried on anyway.

It is interesting to hear how much they know about how the business operates ie. you were on a direct debit scheme which I question how they could prove that and same with going onto the portal. Also I read that not all Boox clients are within scope of this investigation so what have the Directors of these companies shared with HMRC.

I understand that they would have lost their clients but it is still disingenuous for them not to let their clients know as you are ultimately in the firing line. I know what all contractors are going to be asking their accountants now 'does HMRC have a MSC investigation against you?'

Just to finish off the fact that Directors were not able to dissolve their companies must have been a huge red flag but sounds like this also was downplayed when you went back to them. This all feels like deja vu with all of this.

[eek]

The arguments being used are the ones that come from the CBS tribunals - and all HMRC is doing is seeing how far they can push it.

[Fraidycat]

What's troubling about this is, tell me anyone using an accountant where this doesn't hold? Short of everyone doing their own accounts, what else can you do?

I pay my accountant once a year to do year end accounts and CT return. I don't use him for tax advice. I tell him how much in divis i took during the year, not the other way around. He sends me an invoice (less than £500).

[DealorNoDeal]

There is nothing anywhere that says CBS was a tax avoidance scheme. They were a tax minimisation scheme (composites followed by PSCs) for more risk adverse contractors.

That's definitely not how HMRC would see it.

Up to April 2007: 1000 contractors are employees of several CBS composite companies
MSC rules come in
May 2007: CBS creates 1000 PSCs; moves the 1000 contractors to those PSCs
CBS takes a % of the contractors income as fees; manages everything to do with the PSCs
From the contractor's perspective, it's just a different method of getting paid the same small salary + divis

The move to PSCs is artificial and contrived, and serves no other purpose than avoiding tax&nics.

That has all the hallmarks of a tax avoidance scheme, and wilfully flouting the MSC anti-avoidance legislation to boot.

[Hareforthebear]

I feel like it should matter that the PSCs are not dependent upon the ‘MSCP’ (Boox/CK). At any point they could’ve changed Accountants, as they are stand alone independent Ltd cos. Surely the intention of the legislation is that the MSCs could not exist without the MSCP given they are the ‘provider’.

The 3 points seem extremely tenuous in this context, in fact it is the exact services that are being paid for. It should not matter the delivery method of the proprietary software, it does not make the PSC dependant on the Acct/‘MSCP’, as again at any point they move accts, does this mean the PSC ceases to be an MSC at that point?

Really don’t see how this could be argued but no doubt they will try. Easier than going after BBL fraud etc isn’t it.

[malvolio]

I feel like it should matter that the PSCs are not dependent upon the ‘MSCP’ (Boox/CK). At any point they could’ve changed Accountants, as they are stand alone independent Ltd cos. Surely the intention of the legislation is that the MSCs could not exist without the MSCP given they are the ‘provider’.

The 3 points seem extremely tenuous in this context, in fact it is the exact services that are being paid for. It should not matter the delivery method of the proprietary software, it does not make the PSC dependant on the Acct/‘MSCP’, as again at any point they move accts, does this mean the PSC ceases to be an MSC at that point?

Really don’t see how this could be argued but no doubt they will try. Easier than going after BBL fraud etc isn’t it.

There are some fine degrees at play here. For example, "I paid myself this amount last month", "I intend to pay myself this amount and this dividend, is that viable?", "How much can I pay myself without exceeding these limits on profits and taxation?", "How much should I pay myself this month?", "We suggest you pay yourself this amount this month", "Our software has supplied you with this month's preferred figures", "Your pay will be in your bank account on the 15th"....

Where is the boundary between advice and interference, in the eyes of HMRC who don't believe YourCo is a valid trading vehicle in the first place??

[GregRickshaw]

Here's the reasoning (almost entirely verbatim; I just shortened 'BOOX' company name) from HMRC's letter regarding why BOOX satisfies the conditions (a), (c) and (d) of Section 61B (2):



As a reminder, here are the conditions from the legislation:

• (a) Benefits financially on an ongoing basis from the provision of the services of the individual
• (c) Influences or controls the way in which payments to the individual (or associates of the individual) are made
• (d) Influences or controls the company’s finances or any of its activities

It is interesting to hear how much they know about how the business operates ie. you were on a direct debit scheme which I question how they could prove that and same with going onto the portal. Also I read that not all Boox clients are within scope of this investigation so what have the Directors of these companies shared with HMRC.

I understand that they would have lost their clients but it is still disingenuous for them not to let their clients know as you are ultimately in the firing line. I know what all contractors are going to be asking their accountants now 'does HMRC have a MSC investigation against you?'

Hector have made a right mess of getting everything out to everyone, so maybe that's the reason some haven't got letters. Hector is sending emails to say; paraphrased... "Don't worry if you haven't got a letter yet we'll get it to you and don't worry we'll change the issued date to still give you 30 days..."

As to the what have the directors of CK and Boox shared, I wonder this too many times, especially in the part I posted about what CK apparently have fallen foul of the rules on. 'Having spoken to client companies?!? - just what?!?

Condition a - H believes this is met as CK has an annual fee that is broken down and collected over 12 month and that there is also a reduced fee for 'inactive' companies.

Condition c - H believes this condition is met as CK provide each client company with a yearly statement showing them how much they are to receive and this is then divided by 12 and spread across the year. If the client company would like to change this, then they would have to contact CK

Condition d - H believes this condition is met through evidence gathered from speaking to client companies; it is apparent that they cannot operate without the portal as they do not pay themselves without checking/using the portal first. H contends that there is no independence from the portal and by extension CK and that the directors are not discharging their obligations without external influence.

[Chevalier]

Condition d - H believes this condition is met through evidence gathered from speaking to client companies;.[/I]

speaking? No… These will be the poor handpicked souls that HMRC is investigating, demonstrating the worst possible case.

[Sonic3389]

from speaking to client companies; it is apparent that they cannot operate without the portal as they do not pay themselves without checking/using the portal first.[/B][/I]

speaking? No… These will be the poor handpicked souls that HMRC is investigating, demonstrating the worst possible case.

This part worries me, what idiots did they speak to that told them this? who tf can't pay themselves without checking the portal(s)? The new tax limits are announced before each new tax year starts, you know right then and there what you'll be paying yourself for the year?