Churchill Knight & Boox clients being investigated as Managed Service Companies

[tenten]

That's Ok for the future (if indeed Hector can be persuaded to desist on that basis) but it doesn't address the historical issue which is what we're talking about here.

I haven't seen all these different offerings to compare them (I have seen the portal my accountant offered, and my previous accountant sent me a spreadsheet template) - what's in them that suggests they are a "gotcha" for a provider being an MSC, as opposed to a helpful tool for bookkeeping and calculation of liabilities such as corporation tax and VAT (which is what the spreadsheet did)?

I don't recall reading anything in the ruling that specifically called out the use of a digital portal as being a problem. I guess an argument might be that they are not part of the "accountancy" exemption because they may be viewed as a software company that happens have some accountants...... rather than an accountant that uses some software.

Even if that was a successful argument, they still have to show that the MSCP is "involved" with the PSC by influencing or controlling certain aspects of the business and/or finances. I could be wrong, but I think the vast majority of providers will be well aware of these aspects and will have been creating audit trails accordingly to try and nullify it.

[Chevalier]

Before we announce the death of PSCs, it’s worth bearing in mind the abuses the legislation was intended to prevent, and how the legislation is written.

From what I can see the legislation was created to counter sham companies being used as a method of paying clients in a tax efficient manner - little else happened.

One requirement of the legislation is to be paid more (net of tax and ni) than the gross client fees paid as a salary (net). Compared to when the legislation (2007) was written the Ltd Co benefit has narrowed considerably. So those Ltds with a reasonable cost / asset base may well not be caught. (Be careful regards expenses)

I’m dubious about the use of software being a factor in all of this (but we shall see as more is revealed). Making Tax Digital requires the use of tax software!

[eek]

Before we announce the death of PSCs, it’s worth bearing in mind the abuses the legislation was intended to prevent, and how the legislation is written.

From what I can see the legislation was created to counter sham companies being used as a method of paying clients in a tax efficient manner - little else happened.

One requirement of the legislation is to be paid more (net of tax and ni) than the gross client fees paid as a salary (net). Compared to when the legislation (2007) was written the Ltd Co benefit has narrowed considerably. So those Ltds with a reasonable cost / asset base may well not be caught. (Be careful regards expenses)

I’m dubious about the use of software being a factor in all of this (but we shall see as more is revealed). Making Tax Digital requires the use of tax software!

HMRC don't like PSCs they would much prefer people were paid via PAYE...

And what is a PSC other than a legal tax efficient manner in which to be paid.

Beyond that - your third paragraph is wrong - the difference in tax between a limited company and a contractor is still 15% or so (i.e. Employer NI) and how HMRC gets information for processing really doesn't matter here.

Bottom line is that HMRC have been given a means via the Court of Appeal's decisions on the MSC legislation to attack PSCs on mass. HMRC are doing that based on criteria that we don't 100% know but can have a good guess at and I suspect that one criteria will be custom code...

but again this is just my take of things - I may be wrong but only time (and it will be a long time as it wonders through multiple tribunals / appeals) will tell.

What I would say is don't sign up for a monthly payment scheme now - get your initial appeal in ASAP but once you've done that all you can do is wait until a decision is made at some dim and distant future point.

[Supergirl007]

I feel like such an idiot. I pay them a monthly fee to do my bookkeeping, VAT and company accounts. I am not sure what I have done wrong.

Whilst this is going on, do I find another accountant? If so, where?

What a mess ??♀️

[GregRickshaw]

I feel like such an idiot. I pay them a monthly fee to do my bookkeeping, VAT and company accounts. I am not sure what I have done wrong.

Whilst this is going on, do I find another accountant? If so, where?

What a mess ??♀️

Don't feel like an idiot this is not your fault, (well some on here would have you believe it is and apparently we shouldn't be running companies if we are using accountants), you have done nothing wrong at all it's CK who maybe at fault here and they have left us with the huge debts to pick up.

This will go on for a long time, Hector is coming for 17/18 because that's the furthest they can go back, they will then come for every year up to now.

If you switch accountants at the financial end of year this maybe a good time to look and start again. Like you though where do we go and will we still be here in a years time when we are bankrupt and homeless?

We are all looking and all as confused as it seems all others operate the exact same way (which is probably why so many are now being investigated too) so just what do we do now?

[SoConfused]

I feel like such an idiot. I pay them a monthly fee to do my bookkeeping, VAT and company accounts. I am not sure what I have done wrong.

Whilst this is going on, do I find another accountant? If so, where?

What a mess ??♀️

I know how you are feeling as I am in the same boat as you. I feel more confused than an idiot though. I don't think it is fair to put an "idiot" label on yourself for this. Had you chosen one of the many other online accounting services they would be offering you the same services with the same portals etc. Speak to other PSCs and they will all tell you the same. Had you gone to a local one person accountant, the advice given and service again would be the same but maybe in old school spreadsheets. We have a long time of stress hanging over us because of this rubbish. But I guess we can only roll with it and see where it ends.

[rabbleish]

I feel like such an idiot. I pay them a monthly fee to do my bookkeeping, VAT and company accounts. I am not sure what I have done wrong.

Whilst this is going on, do I find another accountant? If so, where?

What a mess ??♀️

I have a feeling there is quite some distance between paying a monthly fee for the services you describe and the kind of practices that Costelloe were up to that allowed hector the win.

I was pretty old school - all managed in a spreadsheet which was used for quarterly vat calcs and end of year by the accountants. I made ALL payments for everything by cheque (yes I know), and the accountants were paid by direct debit. I decided when and where profits were drawn, what was a valid expense, pension amounts etc.

Also accountants cocked up and I had to make them correct returns a couple of times. I cocked up a couple of times too. Wouldn't have happened if someone else was doing all the work like Costelloes as I wouldn't have known.

It's still possible that hector might try and claim that somehow that is MSC like but I took all decisions, and the accountants just provided a spreadsheet which allowed them to do the vat and CT. Never used a portal as they didn't have one.

I think they will be looking at the more automated, system driven end of the market.

[Peoplesoft bloke]

Array

I think they will be looking at the more automated, system driven end of the market.

But all the "automation" did was make calculations. You could do that with a spreadsheet.

[Peoplesoft bloke]

Array

HMRC are doing that based on criteria that we don't 100% know but can have a good guess at and I suspect that one criteria will be custom code...

but again this is just my take of things - I may be wrong but only time (and it will be a long time as it wonders through multiple tribunals / appeals) will tell.

What I would say is don't sign up for a monthly payment scheme now - get your initial appeal in ASAP but once you've done that all you can do is wait until a decision is made at some dim and distant future point.

I don't see the logic of this. All the custom code does is calculations surely? You could use a spreadsheet for that - HMRC surely can't argue because you let a professional expert furnish you with calculations you had an MSC?

As for monthly payment scheme - why would paying monthly for bookkeeping and accountancy equate to an MSC?

None of that makes any sense.

[rabbleish]

Array

But all the "automation" did was make calculations. You could do that with a spreadsheet.

Sorry probably the wrong implication given by the use of the word automated..

I meant the stuff that Costelloe was doing in their cookie cutter process, like automatically adding themselves as directors to each company, registering the companies in the first place, registering for VAT, managing the bank accounts, making payments, probably deciding any dividend amounts for their clients, dipping in and grabbing the interest the accounts generated. All of that smacks of a tightly controlled process, under the control of Costelloes, not the client.