Churchill Knight & Boox clients being investigated as Managed Service Companies

[eek]

75% chance of win based on what?

Remember I'm cynical from 15+ years of watching things but based on the way Tax Tribunals now seem to pay more attention to what is "correct/fair" in their / HMRC eyes rather than what the actual Parliamentary Act says.

And if you look at the CBS Judgment the bit that screams out to me is the expectation of a paper trail to accept the suggested salary when the reality is why would someone send an email confirming the suggestion of your accountant. Given the other (incredible) abuses in that case you have to ask why the low salary thing was mentioned at all yet it was in the initial tribunal and both appeals.

And this case is going to turn on really tiny, seemingly insignificant, details like that which is why I can see Greg is so worried because (being frank) having read the judgments and discussed them with a lawyer I know I think he is right...

Now 75% is how I think HMRC rate their chances, I think it's less than that but at best it's going to be 50/50 and there but for the grace of God goes everyone when their picked a firm of accountants that specialised in Contractors.

[THEPUMA]

Personally, I would assess it the other way round ie 75% likelihood of CK clients winning.

if the courts look at what is fair, like you’ve said, this is entirely different to the Costelloes and ropey EBTs and umbrellas that we’ve seen in the past. I genuinely think it would be massively unfair to go after CK clients. I really don’t think they’ve done anything wrong. And the ramifications of CK losing are vast.

[GregRickshaw]

According to Boox, HMRC is not waiting until „they win“ they are sending out letters to all contractors demanding that pay the tax and then if and only if Boox laters „wins“ will HMRC refund the contractors.

The letters do sound similar to be fair. They have demanded payment from CK clients, and only if the case collapses monies will be refunded.

However, you do have the right to appeal and if you do then you do not have to paying anything until the case if proven, unpalatable as having the Sword Of Damocles style waiting may be you do have that option.

The other possible outcome here could be you have missed your 30 day appeal window, so payment has become payable and in full and no refunds.

[cojak]

Until the CK case appeared no-one had given thought to the MSC legislation since about 2006 because few people were running MSC schemes (other tax avoidance schemes were way more profitable for the organisers).

So personally I don't see any point - because even CK are going to be very careful going forward and in reality all any accountant needs to do is to use something like Xero or Freeagent for their front end...

Thanks Eek, I was about to post much the same thing - we have very little to go on and it’s too early to say anything (the inside/outside IR35 thread was a culmination of several previous posters - this is the first in this instance).

The only thing to say has already been said over many years on this forum - go with an accountant who uses Freeagent or Xero.

[eek]

Personally, I would assess it the other way round ie 75% likelihood of CK clients winning.

if the courts look at what is fair, like you’ve said, this is entirely different to the Costelloes and ropey EBTs and umbrellas that we’ve seen in the past. I genuinely think it would be massively unfair to go after CK clients. I really don’t think they’ve done anything wrong. And the ramifications of CK losing are vast.

You misunderstand what I meant by fair there - it's fair as in everyone else is paid via PAYE so they should have been as well...

That's not to say that it isn't massively unfair (because it really will be random choice of accountant determining if you are caught or not) but there is enough within the Costello judgments to give me serious concern - given how interested the Court of Appeal were in making sure a precedent existed that setting a low salary without a formal instruction / confirmation was sent is problematic.

[jamesbrown]

Agree with THEPUMA for the reasons given, plus it wasn’t what Parliament intended, so MPs would need to get involved at some stage and the constituency would potentially be quite large, not a few hundred or thousand people. However, we’re a long way from that moment and I struggle to see HMRC getting over the first hurdle. Still, they sort of win either way because some fraction of people will cave at the first opportunity and the MSC legislation was very much in the background until now. Bad news for accountancy firms too.

[GregRickshaw]

Remember I'm cynical from 15+ years of watching things but based on the way Tax Tribunals now seem to pay more attention to what is "correct/fair" in their / HMRC eyes rather than what the actual Parliamentary Act says.

And if you look at the CBS Judgment the bit that screams out to me is the expectation of a paper trail to accept the suggested salary when the reality is why would someone send an email confirming the suggestion of your accountant. Given the other (incredible) abuses in that case you have to ask why the low salary thing was mentioned at all yet it was in the initial tribunal and both appeals.

And this case is going to turn on really tiny, seemingly insignificant, details like that which is why I can see Greg is so worried because (being frank) having read the judgments and discussed them with a lawyer I know I think he is right...

Now 75% is how I think HMRC rate their chances, I think it's less than that but at best it's going to be 50/50 and there but for the grace of God goes everyone when their picked a firm of accountants that specialised in Contractors.

If it wasn't for the 'benefited from' point, and HMRC's seemingly happy that monthly fees count as benefiting from argument, then I would think CK have around 50% chance.

However I have no idea how they CK can possibly argue that one (monthly fees).

We can only hope HMRC have misinterpreted the legislation as suggested, I suspect this is what CK are hoping and trying to get clarity on.

On advice from here and my tax lawyers I am paying HMRC the on account payments etc., rather than going the non refundable settlement offer (they won't budge on that anyway - yet). We then look forward to 18/19 20/21 21/22 battles.

[eek]

If it wasn't for the 'benefited from' point, and HMRC's seemingly happy that monthly fees count as benefiting from argument, then I would think CK have around 50% chance.

However I have no idea how they CK can possibly argue that one (monthly fees).

We can only hope HMRC have misinterpreted the legislation as suggested, I suspect this is what CK are hoping and trying to get clarity on.

On advice from here and my tax lawyers I am paying HMRC the on account payments etc., rather than going the non refundable settlement offer (they won't budge on that anyway - yet). We then look forward to 18/19 20/21 21/22 battles.

The thing with the reduced fees when not working thing was that it made logical sense on a marketing level and you wouldn't think lowering a fee would impact things the way a fixed percentage would.

The adage - no good deed goes unpunished really does spring to mind here.

[malvolio]

The thing with the reduced fees when not working thing was that it made logical sense on a marketing level and you wouldn't think lowering a fee would impact things the way a fixed percentage would.

The adage - no good deed goes unpunished really does spring to mind here.

Commercially, rather than as a marketing ploy, I never really bought the reduced fee for non-working time thing. Over 90% of the accountant's work is at year end, all you're doing is spreading the cost of the service over the year. And while the idea of an annual bill for a few hundreds up to £3k or so is not the happiest idea, it should be well within most contractor's budgets.

Varying that service charge on the basis of the client's ability to pay it seems counter to sensible business practice, and you can kind of see HMRC's point. It's still hugely wrong of course, but the law of unintended consequences is alive and well.

[SoConfused]

You misunderstand what I meant by fair there - it's fair as in everyone else is paid via PAYE so they should have been as well...

That's not to say that it isn't massively unfair (because it really will be random choice of accountant determining if you are caught or not) but there is enough within the Costello judgments to give me serious concern - given how interested the Court of Appeal were in making sure a precedent existed that setting a low salary without a formal instruction / confirmation was sent is problematic.

CK don't set a low salary without a formal instruction / confirmation. I tell them what salary I will be taking that year.