Churchill Knight & Boox clients being investigated as Managed Service Companies

[tenten]

Looking at it from HMRC's side of things - you have a massive extension of what is caught under the MSC legislation, bosses (at various levels) wanting to "recover" a large amount of "avoided" tax and some examples that may be easier to argue than the far worse examples we've seen posted on LinkedIn.

So I can see why they are going after Box and CK because their portals seemingly give them attack points that aren't available elsewhere.

Got to say that Freeagent and one off fees as you pay for your accountant to do the tasks you want done does seem to be the only sane approach going forward.

Yeah, I generally agree with this eek - best to be steer a course as wide of the MSC concerns as possible. I was already a long time FreeAgent user but I have now decided to move to a time & materials agreement with my accountant.

WTT touched on the custom portal/app point. Their view was that if the portal was just a means to communicate data to and from accountant and client, then that in itself was very unlikely to be enough to overturn the accountancy exemption. If, however, the portal was providing automated advise/actions on behalf of the client then they could see how that could be challenged - you arguably haven't subscribed to an accountant but to an algorithm.

I imagine the defence would centre around the fact that the accountants formulated the algorithm to provide custom recommendation per PSC. As long as the PSC can and did choose to challenge/ignore/over rule that advise occasionally, I can see that being a useful fact.

[eek]

I imagine the defence would centre around the fact that the accountants formulated the algorithm to provide custom recommendation per PSC. As long as the PSC can and did choose to challenge/ignore/over rule that advise occasionally, I can see that being a useful fact.

Sadly I can't see that argument standing up - at the end of a day all a computer does is generate a result based on inputs - no human touch is involved there.

And looking at the upper tax tribunal judgment 2 (out of the 5 people) were shown to have chosen what to do themselves and that wasn't enough for them to escape...

[neneh]

+1 - if HMRC had any real evidence against NW or other firms they would have issued letters before April 6th. By not doing so they've lost potential £x0ms because they can no longer chase tax from 2017/18. I doubt they would have done if they had had anything they could work with.

I am just speculating. Perhaps due to manpower post covid and also the fact that they do not have a strong evidence against NW and all other PSC provider, they did not issue any letters. Imagine the volume of work if they were to go after all the PSC providers. Most of the PSC provider operate in the same way.

Also when they changed the IR35 rule last april, i would have thought most contractors have switched over to PAYE/umbrella. Now they are just throwing the net for prior years.


I have just been made aware of all these MSC challenge of using PSC and to my horror just read about the Christianuyi vs HRMC verdict. From MSC to loan schemes to PSC, HMRC has tracked all these one by one with the risk of retrospective taxation. My take is the only way you can sleep well at night is to go umbrella or Permanent.

[GregRickshaw]

I am just speculating. Perhaps due to manpower post covid and also the fact that they do not have a strong evidence against NW and all other PSC provider, they did not issue any letters. Imagine the volume of work if they were to go after all the PSC providers. Most of the PSC provider operate in the same way.

Also when they changed the IR35 rule last april, i would have thought most contractors have switched over to PAYE/umbrella. Now they are just throwing the net for prior years.


I have just been made aware of all these MSC challenge of using PSC and to my horror just read about the Christianuyi vs HRMC verdict. From MSC to loan schemes to PSC, HMRC has tracked all these one by one with the risk of retrospective taxation. My take is the only way you can sleep well at night is to go umbrella or Permanent.

They haven't got that strong evidence on the two they have chosen but it hasn't stopped them!!

They have gone for CK and Boox because they are big enough to send shock waves around the industry.

Also it seems they have gone for two very different accountancy approaches, Boox have been captured on very different arguments of point c and point d to how CK have been captured. Point a is the fee thing which both seem to have done, which apparently is enough anyway.

So HMRC are covering all bases in this one hit. It's genius really.

and your last sentence is probably a big part of why HMRC have done this to force those on the fence into one or the other.

[Daggster]

They haven't got that strong evidence on the two they have chosen but it hasn't stopped them!!

If indeed they don't have enough/strong evidence then imagine how much money they'll have to pay back ....

[GregRickshaw]

If indeed they don't have enough/strong evidence then imagine how much money they'll have to pay back ....

Having strong evidence when it comes to Hector is irrelevant really. They have to convince a Crown Court judge, in a Crown court and the prosecution is the Crown... it ends one way only.

I can only hope but I am totally resigned to having lost the liability.

The next part of our actions begin when/if we lose the case and it won't be action against Hector.

I fully suspect CK (I don't know about Boox) knew about this a long time ago (three years ago is the rumour) and they could have acted then to let us know, it would have prevented potentially three more years of liability, had we been able to go elsewhere. Instead they carried on charging their ridiculous monthly fees to hang on to us.

[neneh]

They haven't got that strong evidence on the two they have chosen but it hasn't stopped them!!

They have gone for CK and Boox because they are big enough to send shock waves around the industry.

Also it seems they have gone for two very different accountancy approaches, Boox have been captured on very different arguments of point c and point d to how CK have been captured. Point a is the fee thing which both seem to have done, which apparently is enough anyway.

So HMRC are covering all bases in this one hit. It's genius really.

and your last sentence is probably a big part of why HMRC have done this to force those on the fence into one or the other.

Can you give a bit more info on what approaches they used for CK and Boox?
All PSC provider charges a fee so technically every PSC is caught by point a.

[DealorNoDeal]

I notice that quite a few posters here previously used loan schemes. I did speculate at the time of the loans crackdown that it would drive a lot of people back to PSCs.

Perhaps HMRC have noticed this too. It's possible they have been keeping an eye on things, to see if people turn to other schemes.

-----

I suspect there's an element of bad luck that they picked CK and Boox but I doubt they'll stop there though if this proves fruitful. I'm sure they'd chuck a ton of resources at it if this turns out to be a goer.

[superdoodle]

If anyone wants to join a Facebook group for mutual support, you can request to join our group. Have been talking to 5 or 6 others via DM this morning.

https://www.facebook.com/groups/2032887096882450

Just to add, I'm only a contractor caught up in this mess but would be good to navigate this with others

[GregRickshaw]

Can you give a bit more info on what approaches they used for CK and Boox?
All PSC provider charges a fee so technically every PSC is caught by point a.

Both have been 'caught' on the same points but in different ways. Purely layman and I think both will lose but Boox look in more bother than CK, but both are in a rare old mess.

Here are the two different 'captures - BOOX

Condition a - HMRC believes this is met as BOOX operate two different payment structures, which I refer to as 'pay monthly' or 'pay in advance'. Under 'pay monthly' a customer pays BOOX each in month in arrears by Direct Debit as per the terms and conditions and customers must continue to pay regardless of whether they are receiving income. Under 'pay in advance' customers pay the fee for six months at a time and should a customer cancel during the six months no refund will be given. Under both payment methods BOOX receive a financial benefit through the provisions of services of the individual.

Condition c - HMRC believes this condition is met as BOOX's product is designed for customers to follow a low salary, high dividend model. Informing customers, the best way to pay themselves equates to influencing.

Condition d - HMRC believes this condition is met as the influence over the company's finances exists because of having influenced the way the individual is paid. Also, customers comply with the operating structures of the app/portal and as a consequence BOOX have an element of control over the activities of the company.

CK

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.