Churchill Knight & Boox clients being investigated as Managed Service Companies

[GregRickshaw]

CK will be communicating with us later today, exactly how HMRC have arrived at the liabilities.

[jamesbrown]

But Chapter 9 is clear Income Tax (Earnings and Pensions) Act 2003 (legislation.gov.uk)



Quoting all that because you need to see subsection 3 to discover that it references subsection 1b which talks about payments to the worker not payments to the MSC / PSC..

Yet it's also clear the HMRC refer to Deemed payments in Spotlight 32 so you can see the cause of the confusion (either HMRC are themselves confused, they are pushing things or they know what is in Chapter 9 isn't good enough so wish to change it)

That is about timing, i.e., the tax point of the deemed payment, not about what the deemed payment *is*. Again, 61F is clear about what the deemed payment is to include and that is all income received by the deemed employee were the intermediary to not exist, i.e., were the worker to be employed by the MSCP.

[jamesbrown]

Just think it through for a moment. If the deemed payment were merely to consider the portion payed to the worker, then the MSC legislation would have a ginormous moneyboxing sized hole in it that would only be recoverable through a separate IR35 investigation, which HMRC would need to win.

[Guy Incognito]

From the perspective of HMRC if they believe the true relationship is one of MSCP and MSC then the figures would hardly differ as the MSCP would tell the MSC to take all the money out of the MSC each month.

[jamesbrown]

From the perspective of HMRC if they believe the true relationship is one of MSCP and MSC then the figures would hardly differ as the MSCP would tell the MSC to take all the money out of the MSC each month.

Not necessarily. That would not be most tax efficient. The figures could differ vastly. As one person caught up in this noted earlier in the thread, they only paid themselves a fraction of the income received by the intermediary. This will be relatively common.

[Sijo]

I believe this link is beneficial to read for everyone affected by this legislation. It gives more details on confluences, control, involvement etc. Its a long read though.

https://www.gov.uk/hmrc-internal-man...manual/esm3520

[eek]

I believe this link is beneficial to read for everyone affected by this legislation. It gives more details on confluences, control, involvement etc. Its a long read though.

https://www.gov.uk/hmrc-internal-man...manual/esm3520

2 words leap out of me when reading that "tailored service"....

[oleanderwand]

Here is the example of deemed payment calculation:

https://www.gov.uk/hmrc-internal-man...manual/esm3540

The above link says Step 4 is the deemed payment.

The next page shows example of how to get to step 4 taking into account Employer NIC (link below):

https://www.gov.uk/hmrc-internal-man...manual/esm3545

According to above link the deemed payment is based on what the MSC pays Ms. G (the worker) in those examples.

However, if the deemed payment is no different from that of IR35 (so not as per examples in manuals above), then determination for tax year 2017/2018 (6 Apr 2017/5 Apr 2018) likely would need to take into account the proportion of payments received by PSC from its client(s) covering 2 accounting periods? 6 Apr - 5 Apr would straddle 2 accounting periods of PSC, wouldn't it, as accounting period of PSC usually starts on the 1st of the month except on its very first year?

[DealorNoDeal]

Presumably, HMRC will have already gone through this with CBS clients? It might be worth trying to find out how they calculated what was due.

This might be another reason why HMRC won't let CK clients settle at the moment; they know the figures on the assessments are just guesstimates.

[eek]

Presumably, HMRC will have already gone through this with CBS clients? It might be worth trying to find out how they calculated what was due.

This might be another reason why HMRC won't let CK clients settle at the moment; they know the figures on the assessments are just guesstimates.

Not really - HMRC could have used the approach in Chapter 9 (rather than the IR35 Chapter 8 / 10 approaches) because of the way CBS worked with all money being made available when the worker was paid (x was sent as salary, the rest was sat in a card account waiting to be spent). Remember this scheme in ancient history before the introduction of the dividend tax so CBS could be more blaise than you are need to be now.

So while I can follow jamesbrown 's logic about how to do the calculation I can see why WTT are more hesitant about answering the question because the actual law, tax manuals and statements from HMRC don't provide a consistent answer nor a working solution given the vast widening of what's caught by the MSC legislation..

And 1 possible mitigation option would be to get a tribunal to confirm what set of calculations need to be used to calculate what money is subject to income tax.