Churchill Knight & Boox clients being investigated as Managed Service Companies

[eek]

HMRC can only go after 2017/18 onwards. I wouldn't be surprised if they assess 2018/19, 2019/20 and 2020/21 this year.

eek is right about the interest, it won't be anywhere near 50%. (At a guess, currently about 13% for 2017/18.) You can roughly work it out from this. It will keep accruing every year unless you make payments on account.

https://www.gov.uk/government/public...interest-rates

Technically they can now only go after 2018/19 onwards - because we are past the discovery deadline for the 2017/18 tax year which was April 5th 2022.

However, if they opened an inquiry for 2017/18 before April 5th 2022 then it's open and HMRC can still demand tax for that tax year.

[mogga71]

HMRC can only go after 2017/18 onwards. I wouldn't be surprised if they assess 2018/19, 2019/20 and 2020/21 this year.

eek is right about the interest, it won't be anywhere near 50%. (At a guess, currently about 13% for 2017/18.) You can roughly work it out from this. It will keep accruing every year unless you make payments on account.

https://www.gov.uk/government/public...interest-rates

For the folk who cough up the 'on account' payment and HMRC lose ... do they get 13% interest back ... I would wager not?

[GregRickshaw]

For the folk who cough up the 'on account' payment and HMRC lose ... do they get 13% interest back ... I would wager not?

I would definitely not lay that bet!

I paid my reg80 amount on account, (effectively written it off in my mind) the only thing I will see back will be the CT relief win or lose.

Sorry... if we win then all of it comes back.

[isaaaaaaaaccc]

So back to the question at hand what could be the best option given; timescales, likelihoods and risk appetite.

Despite sincere disagreement of accusations by nearly all parties at this stage, could this be less costly for many outcomes to settle early. The only way I see this costing less than addressing it now is if CK/Boox are not proven to be MSCPs. In that case is the settlement value now for 4 years worthwhile based on the serious cost of waiting this out?

Worst case scenario is that HMRC win this and because people chose fight it or see what happens they incur; interest (this could run for years), refusals from tax reclaims due to passed deadlines (already talk about this being in dispute and more years would pass), large legal/tax fees for advice and representation.

If corporation tax payments are not successfully reclaimed due to timescales than this would likely cost more than fighting the whole thing potentially and winning... Or they would least have a serious impact. So yes, you could pat yourself on the back if you refute HMRC, but in reality it simply cost you more anyway because your time window for corporation tax reclaims has ended, nevermind the interest.

This could all be avoided begrudgingly with settlement early before it even runs, or at least when we know a little bit more about it... Thoughts?

[eek]

If you have the money give HMRC the money as a payment on account - which stops interest being charged. Separately raise a tax claim on the corporation tax so that it can be reclaimed if necessary.

Don't settle because if CK/Boox are proven not to be an MSCP you won't get your money back.

[GregRickshaw]

What eek said.

Also bear in mind HMRC have zero appetite for settlements they intend to collect every £ owed.

I tried very early doors to ask for settlement and was hit with a flat bat forward defensive Geoff Boycott would be proud of

[Fred Bloggs]

If you have the money give HMRC the money as a payment on account - which stops interest being charged. Separately raise a tax claim on the corporation tax so that it can be reclaimed if necessary.

Don't settle because if CK/Boox are proven not to be an MSCP you won't get your money back.

+1. Probably the best piece of advice on the entire thread. No point caving in if you can pay the same on account where there's a chance of getting your money back within the next 5 or 6 years. I have fair confidence myself that the majority of contractor limited companies will eventually be exonerated. But it's going to be a long road ahead, no doubt about that. Naturally, I might be entirely wrong and everyone's caught. But I doubt it.

Payment on account is the best bet as long as you can afford it. Then sit and wait.

[Hareforthebear]

We also need to remember that Class 1 NI is yet to come and I understand Hector can go back 6 years for this (pls correct me if I'm wrong)

The section in the letter about NI seems to read to me that they’re still on the fence about this all. Copied below: (don’t think there’s an issue doing this?)


“For completeness, I need to inform you that should the MSC Legislation apply there will also be a liability to class 1 NICs.

As NI is a civil debt, it does not follow the same time limits as Tax. This means that we still have at least 18 months before I need to consider taking any action via the county courts to legally protect the debt.

Taking protective action via the courts incurs court costs that I would prefer to keep to a minimum, hence why I am not taking protective action at the moment.”


Then mentions let them know if you require a more detailed breakdown of both tax and NI potential liabilities, before saying it would only be indicative and likely to change as “we gather more facts and establish the correct position”.

The bit about minimising costs, does that mean costs to them? If it is the case that our CT and any self assessment paid can be offset against the determination in some way, then (I know in my case at least) they really only have the NICs to gain here and potentially owe me money on the tax front. Yet they are seemingly undecided about pursuing currently due to costs??

[DealorNoDeal]

For the folk who cough up the 'on account' payment and HMRC lose ... do they get 13% interest back ... I would wager not?

No, you get the measly Repayment rate (0.5%), from the date you made the PoA.

https://www.gov.uk/government/public...interest-rates

[eek]

No, you get the measly Repayment rate (0.5%), from the date you made the PoA.

https://www.gov.uk/government/public...interest-rates

It's Bank of England base rate - 1% with a minimum rate of 0.5%...

So if / when interest rates return to normal levels pay corporation tax early will start to make sense.