Churchill Knight & Boox clients being investigated as Managed Service Companies

[Guy Incognito]

Finally got a response from Hector and they've received my appeal and will respond to me shortly. If anyone hasn't heard from them yet, do chase them up.

Emailed twice, tried phoning. What else is there?

[GregRickshaw]

They still need to claim both sets of NI...

Let us at least have this

[antuk]

Boox have told me they're thinking of putting out a conditional claim letter for their clients to use next month, once the appeals are out the way.

It looks like we'll all miss the deadline for the corporation tax conditional claim in any case, as according to the David Kirk advisor it was end of April, although I'm not clear what exactly was driving the deadline. It's annoying, as that's one reason I wanted to sign up with the David Kirk group (which otherwise is very vague on what you get for your money), but they're prioritising appeals so aren't getting round to processing non-appeal people until next week.

I've not had confirmation of receipt of appeal back from HMRC yet. I've chased but Boox are saying it's not an issue - because the appeal has been emailed in time without triggering a message undeliverable email, it should be accepted.

WTT seem to think the deadline is 5 years on CT, if that's true then have plenty of time

[Guy Incognito]

So using the CK spreadsheet I have managed to reproduce the same numbers as the determination I received for 2017/18.

There are methods for apportionment based on company year end with the tax year 2017/18 which complicates things a little but basically the calculation is:

Deemed Employment Payment = (Turnover - Corporation tax paid) - Employers NIC

SO THEY HAVE DEFINITELY USED PAYMENTS MADE TO THE COMPANY NOT PAYMENTS TO THE INDIVIDUAL FOR THE CALCULATION.

They want PAYE and NI paid for company turnover, regardless of the payments to the individual (and associates).

I don't think this is what it says in ESM3535 - Managed Service Companies (MSC): Calculating the Deemed Employment Payment (DEP) that they explicitly reference in the letters, but obviously they do.

[jamesbrown]

They want PAYE and NI paid for company turnover, regardless of the payments to the individual (and associates).

I don't think this is what it says in ESM3535 - Managed Service Companies (MSC): Calculating the Deemed Employment Payment (DEP) that they explicitly reference in the letters, but obviously they do.

Indeed, but it's the legislation that matters and that reads to me as though it applies to the amounts paid to the intermediary, as with the IR35 deemed payment, and it would be pretty surprising if that weren't the case. Still, there is a relationship with the amount paid to the individual via 61B (1) (b). My reading of that clause is that the legislation does not apply when less than half is paid to the individual. I guess all will be revealed in due course.

[CA100]

He also said if your companies finances are in a digestible form he will send the conditional claim in for you (in fact he advised not to do it yourself) but if he has to contact Boox\CK for the info he will charge a fee (think he said around £100)

Wow! Worth waiting to see if Boox can provide a templated letter in that case. I don't think the calculations would be particularly difficult.

[Guy Incognito]

Email from David Kirk today indicates the group has "well over 150 members".

[Peoplesoft bloke]

Emailed twice, tried phoning. What else is there?

When Hector was trying to stiff me for tax I didn't owe at the start of 2021, I wrote a letter and sent it by post in desperation. That worked.
They have Twitter too but they comment in general rather than taking up particular cases.

[petes1]

Been reading this for a while and thought I would share my view. I have worked in accountancy practices for 20 years across all client sectors. I don't think HMRC, tax barristers, ex-inspectors working as consultants running webinars really should be the ones pondering over what normal accountancy services are. The professional institutes need to take a stand here and support the two affected firms including by applying political lobbying and pressure. Anyone who has worked in any accountancy practice dealing with any small business knows that the owner managers take a low salary and higher dividends. That is normal accountancy practice work. To not do this would be negligent. In fact, each and every year, discussion amongst practice people is rife with what salary they will be "putting" their clients on. It is basic tax planning and something all practices do, biggest to smallest. It is normal work. In fact, in the most recent ICAEW tax faculty publication, the head of the faculty, wrote "It is customary in owner managed companies to pay the directors who own the shares the maximum amount possible without incurring a class 1 NIC liability, with the balance of drawings paid by way of dividends..". He is saying it is "customary", but we have HMRC spewing their nonsense. Perhaps the two impacted firms should use this very senior tax gentleman as an expert witness as to what constitutes normal accountancy work. As I said, the only people who should be telling us what is normal accountancy work are the thousands of accountants who actually do it and their organisations (the ICAEW, ACCA specifically). It is not for others to hypothesise what usual accountancy practice work is. Don't even get me started on the monthly fees thing. It makes sense from commercial points of view to package up services and charge them monthly. Helps with cash flow and so many other things. Books have been written about pricing this way. Again not for HMRC or anyone else to tell firms how they should price or package their services. The CBS case, if I am not mistaken was said by the judges to be exactly the kind of thing that the legislation was advised to tackle. I am sorry to see that this situation must be causing those of you affected, considerable stress. I cannot see HMRC's strawman arguments surviving, but it is vital that the institutes get involved as serious political pressure is needed.

[jamesbrown]

discussion amongst practice people is rife with what salary they will be "putting" their clients on. It is basic tax planning and something all practices do, biggest to smallest. It is normal work.

I agree with much of your post, but the sausage factory accountants, in particular, have been a little bit negligent. The MSC legislation wasn't hidden away. While HMRC may be stretching credulity with the arguments they are making post CBS, it is also a reasonable expectation that accountancy practices understand the legislation that impacts their businesses and take a conservative view about keeping within it. Some of them seem to have serially failed in doing so, based on their marketing ("hands free") and probability in reality too.

There is a spectrum here, and it's looking increasingly likely that some accountants have been very naughty boys. You cannot really blame HMRC for pushing for clarity on what the legislation intended if they see a potential benefit. A lot of accountants have shot themselves (and, more importantly, their clients) in the faces, regardless of the eventual outcome.