Churchill Knight & Boox clients being investigated as Managed Service Companies

[jamesbrown]

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 for HMRC to think there may be a case worth playing with

Sure, worth probing, but the situation described in these paragraphs is not the situation that would ordinarily occur with accountancy. In particular, note this:

and that it was CBS that determined that the surplus profits of a client personal service company would be distributed by way of dividend.

CBS determined that the surplus should be paid as dividends and carried out the necessary administrative steps to obtain this outcome

If your accountant is determining the dividends that should be taken and managing (or failing to properly manage) the paperwork associated with those dividend payments, then you do have a problem, I think.

If, on the other hand, your accountant is offering advice about tax efficient salary/dividends and you approve the salary payments and are ultimately in control of these payments (e.g., via FA or similar or even via their in-house portal/software) and decide on dividend payments independently and prepare the dividend paperwork and make the dividend payments, I think that is a very different situation than the one we see with CBS. The situation described is such that the MSCs were completely hands-off and CBS "took care of everything", including such "details" as salary and dividend payments, from start to finish.

But, yes, I think this idea of salary/dividend splits and how the payments are organised, approved and made will be a point to probe. Where I think it will fail comprehensively, assuming CK were offering plain vanilla accountancy (very much TBD), is when considering everything "in the round".

[jamesbrown]

Of course, if it were decided that an accountant making and implementing a tax-efficient payroll recommendation to a subset or majority of their clients was sufficient on its own for the MSCP to be "involved" with the client as an MSC, then we are talking about 99.9% of contractor accounting here. That would be, er, interesting.

[mudskipper]

Who is Merkel?

I do have very good tax specialists who are going to be engaged on this. However I'm always keen to hear of more.

Apologies, typo - Markel (formerly Abbey Tax)

If you know and trust your specialists, and they are specialists in contractor tax affairs then stick with them.

[eek]

Of course, if it were decided that an accountant making and implementing a tax-efficient payroll recommendation to a subset or majority of their clients was sufficient on its own for the MSCP to be "involved" with the client as an MSC, then we are talking about 99.9% of contractor accounting here. That would be, er, interesting.

The issue is that i don’t think any of us can see any other reason, beyond the crap advertising promise, why HMRC are so interested in CK..

[jamesbrown]

The issue is that i don’t think any of us can see any other reason, beyond the crap advertising promise, why HMRC are so interested in CK..

I suspect it is a combination of their crappy (current) marketing, the packaged approach they have adopted (which is potentially a real issue, not just marketing), the range of "solutions" they offer alongside Ltd company accounting (and the fact the marketing makes them feel like "solutions"), the in-house portal they provide to clients (we know that from what Greg has already said) and perhaps also their history, although I note the discussion above, which seems to indicate that they don't have a particularly colourful history. Still, it all feels a bit flimsy and circumstantial if you strip away the marketing aspects. Unless there is something we don't know, and there often is, then it sounds like HMRC testing the waters (which is not that surprising, coming from an emphatic tribunal decision).

[enda1]

If CK are found to be an MSCP, does that automatically mean that all their clients are MSCs?
If so, can MSCs individually appeal all the way to tribunal even after the sample 5 companies potentially lose their case?

My business is a client of CK (unfortunately...), but in the period in question was a 2 person company with 2 directors of equal ownership.
Our only connection to CK is as our accountants.
When the second director came onboard, the charge to our company did not change.
We are self-billing.
We have our own bank account - not the one recommended by CK (but that CK does have read-only access too)

Thanks for any insight.

[enda1]

I certainly will fight this if my company is somehow lumped in with sham companies.
I simply chose an accountant, for their accountancy services alone so I feel very affronted by the concept that I have being doing anything illegal.

[eek]

There's something 'off' somewhere that none of us know about I suspect.

There is definitely something - although equally it could just be - a combination of their client base (probably 99% contractors), their advertising, their portal and that tax minimising low default salary

Problem is we won't know for a long time and that sort of delay won't do you or anyone else any favours when it comes to panicking (which is sadly something HMRC likes as it encourages payment).

[SoConfused]

I too use CK as my ACCOUNTANTS (in caps as that is all I use them for!) - I pay them a fixed monthly amount which has nothing to do with my contracts and they provide accountancy services for VAT and Corporation Tax. They also have read only access to my business account as others have stated. I am really confused about this whole thing if I am honest. I don't see how a company who state themselves in documents previously shared in this forum could fall into MSC. I don't get it

[enda1]

FWIW I don't believe CK to be a sham company, maybe they played a little fast and loose with the rules (which may be their downfall here) or maybe they did what was legal at the time. At this stage we just don't know what Hector has on them and this induces panic (100% in my case). The only thing I can see is from Hector if we appeal now we will get refunded if CK win the case.

Settlements though you rarely get those returned.

For me I simply can't stand two years of sleepless nights (AGAIN) so I'm swallowing the pill and getting on with my life. That is of course if Hector agree to settle it's not on the table yet but as eek says they will see this a success as maybe they got someone who was outside IR35 who they would never have got with IR35 rules.

Good luck to you too

By sham companies I was referring not to CK, but to any of their potential clients who were handing over control to CK through directorships, having CK invoice, etc. Those companies that this legislation seems to be built to target, not a company like like mine and it appears yours which exist legitimately.