Churchill Knight & Boox clients being investigated as Managed Service Companies

[BolshieBastard]

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.

My, you do love to run with the hare and the hounds!

[petes1]

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.

Respectfully, I don't agree that these two have been naughty. My 20 years tells me that the activities they are carrying out are normal accountancy services carried out by accountants across all sectors. I am not sure what they are doing differently that accountants working with small restaurants (for example) don't do. In fact, experience tells me that contractor types are much more tax savvy as they typically spend a lot of time on computers, double checking and reading everything there is to read. You certainly can blame HMRC for overreaching as the legislation is not there to catch accountants regardless of sector specialism. It is my opinion that the institutes need to do a lot more as only accountants can really say what constitutes normal accountancy work. It is not for HMRC to decide this. The institutes need to do more and nobody should be simply rolling over and accepting this nonsense from HMRC.

[jamesbrown]

My, you do love to run with the hare and the hounds!

Welcome back, Bolshie, and congratulations on your posts meeting their consistently high standard.

[jamesbrown]

Respectfully, I don't agree that these two have been naughty. My 20 years tells me that the activities they are carrying out are normal accountancy services carried out by accountants across all sectors. I am not sure what they are doing differently that accountants working with small restaurants (for example) don't do. In fact, experience tells me that contractor types are much more tax savvy as they typically spend a lot of time on computers, double checking and reading everything there is to read. You certainly can blame HMRC for overreaching as the legislation is not there to catch accountants regardless of sector specialism. It is my opinion that the institutes need to do a lot more as only accountants can really say what constitutes normal accountancy work. It is not for HMRC to decide this. The institutes need to do more and nobody should be simply rolling over and accepting this nonsense from HMRC.

It remains to be seen, but they have been exceptionally naïve, at best. Again, look at their marketing materials quoted earlier in this thread, look at the video from Boox, emphasising how completely "idiot proof" and "hands off" everything is. It is very hard to argue that you're running a business in that context. Of course, there is an element of hindsight about all this, but it wasn't as though the legislation was hidden away. Some of the known practices of CK and Boox (practices they were happy to publicise) were completely oblivious to this bear trap that they've stepped in. I still think they have a good chance of winning, but they've definitely shot themselves in the face.

[GregRickshaw]

The professional institutes need to take a stand here and support the two affected firms including by applying political lobbying and pressure.

I cannot see HMRC's strawman arguments surviving, but it is vital that the institutes get involved as serious political pressure is needed.

This is exactly what David Kirk said on his webinar.

[Guy Incognito]

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.

Inspirational

[Fred Bloggs]

It's perhaps a relatively minor point to make again at this time. But accountants actively marketing at least two levels of service at two monthly price points is very unhelpful. One might assume that the higher level payment client receives more than simple book keeping.

Given the publicity material emphasising the hands off nature of these more premium services, I think the accountant and the client on the premium service are starting their defence at a significant disadvantage.

To the extent, if I were on the lower priced package and given the chance, I would be pointing my finger at the accountant and saying I had a simple book keeping service. But the premium level customers might well have been MSCs. So go look at them. It's dog eat dog now.

[GregRickshaw]

It's perhaps a relatively minor point to make again at this time. But accountants actively marketing at least two levels of service at two monthly price points is very unhelpful. One might assume that the higher level payment client receives more than simple book keeping.

Given the publicity material emphasising the hands off nature of these more premium services, I think the accountant and the client on the premium service are starting their defence at a significant disadvantage.

To the extent, if I were on the lower priced package and given the chance, I would be pointing my finger at the accountant and saying I had a simple book keeping service. But the premium level customers might well have been MSCs. So go look at them. It's dog eat dog now.

The whole 'levels' thing is part of HMRC's case but they are wrong as there are no levels of service charged at higher prices... apart from the dormant company level which is going to be one of the big punch-ups which may prove to be enough.

In the main though the level was a flat fee, no sliding scales or % of income etc.,

As to dog eat dog, it's more every person for themselves which is why HMRC now have hundreds of personal appeals with tons of evidence sitting in a backroom somewhere, so if there are any genuine MSC the rest of us are busy proving we are not.

[Fred Bloggs]

The whole 'levels' thing is part of HMRC's case but they are wrong as there are no levels of service charged at higher prices...

Eh? Two minutes ago at CK website -

Whether you need just a little bit of accounting help or a fully inclusive accountancy service, we have three limited company accounting options for you to choose from.

[GregRickshaw]

Eh? Two minutes ago at CK website -

Ironically that's fairly new. They weren't options in 2012