Churchill Knight & Boox clients being investigated as Managed Service Companies

[GregRickshaw]

Unless they decide the transfer of assets was done in the knowledge of the impending debt...

I'll take my chances

[Sijo]

The WTT presentation was interesting and useful. In short, their analysis is aligned with my own, but there were some interesting details too.

They agree that the accounting exemption in clause (3) is live and probably applies, in reality, for a vast majority of these recent cases even though not acknowledged by HMRC. They agree that FA with an accountant review/input would meet the exemption to the best of their knowledge ("if this didn't meet the exemption, what would?"). However, the closer the relationship is to algorithmic or automated and the further away it is from accounting advice provided by a personal accountant (to be reviewed and accepted), then the more likely this exemption would not apply. This exemption is sufficient for all of (2) to be irrelevant w/r to being "involved with", so it really is the first gate. Again, not acknowledged by HMRC and they were uncertain why, beyond the obvious (facts not aligned with their strategy, which is to probe the line).

They agree that CBS is barely relevant to the facts presented for a majority affected by these recent claims, despite being the benchmark for current MSC case law (since it made it all the way to the CoA). In their words, CBS was a "slam dunk" for the MSC legislation.

As noted elsewhere, conditions (2)(a/c/d) are the ones noted across all determination letters and hence most important. Condition (2)(a) is highly unlikely to apply to the mere payment of an annual/monthly fee for reasons discussed elsewhere in this thread. Condition (2)(d) is unlikely to be met unless the accountant controlled the bank account and made payments directly.

Condition (2)(c) sounds like the most ambiguous one. Their view on condition (2)(c) is that being advised on optimal pay is clearly distinct from being instructed on what payments to make, the latter being a pointer towards an MSCP/MSC.

Condition (2)(e) may be a problem if your accountant offered tax loss insurance and you took it.

They noted the draconian debt transfer rules and the fact that a mere association with the MSC could be enough to transfer a debt (in other words, transferring assets to a partner is a complete waste of time).

They noted that the legislation is silent about CT paid, but dividend taxes could be reclaimed against the deemed payment, assuming the time limits were met (they mentioned 5 years).

They asserted that a Reg 80 determination couldn't be issued to a closed company and hence the debt transfer provision couldn't kick-in in that situation, but that HMRC can restore a company.

They made one assertion that sounds wrong to me, namely that the deemed payment calculation is based on salaries/dividends actually paid and not the payments made to the PSC in respect of work performed by the individual. That is not how it works with the IR35 deemed payment (Chapter 8) and I think it's the same for Chapter 9 (MSC), but I will need to double-check. I challenged them via a chat/question, but they didn't answer it.

With respect to the Corporation Tax, when I look at the MSC legislation (https://www.gov.uk/hmrc-internal-man...manual/esm3555) and CT2009 Law, it does talks about deducting deemed payment for calculating the profit. Below link is for calculating the profit for deemed employment specifically for MSC. Or am I reading it wrong.

https://www.legislation.gov.uk/ukpga/2009/4/section/141

[GregRickshaw]

Unless they decide the transfer of assets was done in the knowledge of the impending debt...

Not the transfer by the director to their partner, the letter stated if the debtor/director could not pay then the partner was not liable for the debt by default.

[malvolio]

I'll take my chances

You'd lose...

[malvolio]

Not the transfer by the director to their partner, the letter stated if the debtor/director could not pay then the partner was not liable for the debt by default.

No, but what if they decide (possibly correctly) that the debtor is unable to pay because they diverted their assets elsewhere to put them out of reach...?

GAAR covers a lot of ground.

[eek]

No, but what if they decide (possibly correctly) that the debtor is unable to pay because they diverted their assets elsewhere to put them out of reach...?

GAAR covers a lot of ground.

The MCS legislation provides a lot of other people they can call upon before using the GAAR to go after the wife.

In Greg's case that will include (and should blooming well involve) his client, the BBC.

[eek]

With respect to the Corporation Tax, when I look at the MSC legislation (https://www.gov.uk/hmrc-internal-man...manual/esm3555) and CT2009 Law, it does talks about deducting deemed payment for calculating the profit. Below link is for calculating the profit for deemed employment specifically for MSC. Or am I reading it wrong.

https://www.legislation.gov.uk/ukpga/2009/4/section/141

The problem is you are looking at Corporation tax paid years ago which due to the period that has past since is unlikely to be reclaimable

[Sijo]

Totally agree with James, that is the worst idea right now. CK explained clearly to us why they cannot represent us anywhere, other than an appeal template to challenge the ruling, they explained if they did help out with those things that could easily be seen as 'involved.

Yes, I do agree with it. I have already communicated to Boox to not appeal on my behalf. I will probably do it myself or with another consultancy

[superdoodle]

The problem is you are looking at Corporation tax paid years ago which due to the period that has past since is unlikely to be reclaimable

In the webinar, they did touch on the notion of 'double taxation' being accepted as
unfair. I have another chat with them on Tuesday so I'll clarify this point.

[jamesbrown]

In the webinar, they did touch on the notion of 'double taxation' being accepted as
unfair. I have another chat with them on Tuesday so I'll clarify this point.

Yeah, there are timelines for making adjustments w/r to each tax, different timeframes for different taxes, but these are invariably exceeded with any tribunal scenario and you can guess HMRC's position (but the advantage of a tribunal is that the judge can be asked to rule when there is no agreement between parties about the quantum and they have latitude to impose something fair). For CT, it's four years since the end of the accounting year.