Churchill Knight & Boox clients being investigated as Managed Service Companies

[jamesbrown]

Thanks mate, much appreciated on the patience.

when it says “end client” is that the company whom paid the invoice? The one that got billed?

if so, during 17/18 year I had invoiced / worked for ten different companies rather than just one. So it’ll have been impossible for me to have been an employee for any one of them as I work on a project to project basis.

Or is the end client actually my limited company? Or in this instance, the MSCP (CK or Boox). If the latter, then I can prove no income came through them but direct to business account. If it’s the former, then really how do you argue that? Majority of the companies I worked with only engaged with limited companies rather than sole traders/umbrellas so I would have been f&cked either way then.

I think you’re over-analysing the situation, which is understandable, but the legislation is really quite abstract. Think of it as having the same *effect* as IR35 but without being IR35 or having the need to argue about your employment status. In other words, it doesn’t matter whether your income was from one client or twenty one and it doesn’t matter what your relationship with them looked like. Add up the total income across all of them and treat that income as IR35 caught. Again, it wasn’t, but that is the practical effect of the MSC legislation in terms of the liability. From HMRC’s perspective, it has the power of IR35 (the same deemed payment) without most of the hassle because they don’t need to argue about your employment status with end clients. They simple need to demonstrate that your company was involved with an MSCP.

[jamesbrown]

Another question to the wider community.

As I am coming to realisation that this isn’t going to end well. I am trying to workout the worst case scenario.

if we are all guilty and liable for excess sums to be paid back for 17/18, 18/19 and 19/20 then what naturally happens for 20/21 and 21/22. I had boox complete my year end for those last two years does that mean I’ll also be liable for outstanding costs for those years not mentioned in the HMRC letter? Will those be next, if successful?

and then, would it makes sense to move to a high street accountant… who let’s be honest, will be instructed to enter a tax efficient salary with dividends on top (literally what most of us did with said accountants). Or… as our LTD company now deemed an MSC then all (following tax years) future earnings for that limited company will be sought after for unpaid taxes?

my issue is where does it end? How do we proactively end the chase game? I worry that I am essentially digging my own grave by still relying on my currently exposed limited company as the main source of income.

If becoming a permie isn’t an option… then does it make sense to just open another limited company? And put the old one to bed (as it feels like the harder we work, the more money we pour into it, the more we are getting penalised. And with my partner not allowed to be classed as an employee… do I tell them to leave and find another job? Get another source of income…) or are we as directors, tainted and will be investigated in other dealings? Like a new limited company?

All sensible questions. Eventually, they will be interested in later tax years, but my understanding of the current scope of the investigation is those three tax years.

But, yes, you should stop the bleeding (or risk thereof) now by moving on from your current accountant IMHO.

No, your company being an MSC is a temporary state w/r to a tax year and accountant (MSCP) in question, not a permanent one, so you can certainly stop the bleeding. Your company cannot be an MSC when no longer involved with an MSCP.

The order of risk is something like pay monthly contractor accountancy (with degrees of risk varying), annual accountancy for year-end returns only, and DIY with FreeAgent or similar. Pick your position on that spectrum, but bear in mind that the least risky in terms of the MSC legislation is riskier in other regards if you make errors or fail to meet your statutory duties. A reasonable compromise may be year-end accounts only with a local practice (i.e., a one-off annual payment).

[jamesbrown]

Also, to be clear, I still think HMRC will ultimately lose (but the risk they won’t is certainly much greater than we imagined before CBS).

[Chevalier]

The reality was she was, she wasn’t a disguised “secretary” per se. She dealt with new business and client management. There are and is evidence showing that in correspondence etc.

I guess my point is… if I had a bakery with three employees who happened to all be family members, and they were all paid a small salary and high dividends. But, were then accused to be an MSC, then why would only one person receive the “bill”? Why would this not be spread across all individuals who actually worked there? Since this is a PAYE determination… would not all of the workers need to pay NICs and PAYE too? Their NI numbers to record payments to build credit etc.

I think you maybe conflating two different arguments.

Paying your a salary out of “YourCo” as an expense if justified if she is performing admin tasks and drumming up new business (and may be evidence of being in business on your own account)

However what’s potentially being taxed as salaried earnings is the revenue of “YourCo” and the services contracted and paid for by the client. If she is providing part of the services paid for you might have an argument. If she is chasing up unpaid invoices, then regrettably not.

[jimmyoyang]

All sensible questions. Eventually, they will be interested in later tax years, but my understanding of the current scope of the investigation is those three tax years.

But, yes, you should stop the bleeding (or risk thereof) now by moving on from your current accountant IMHO.

No, your company being an MSC is a temporary state w/r to a tax year and accountant (MSCP) in question, not a permanent one, so you can certainly stop the bleeding. Your company cannot be an MSC when no longer involved with an MSCP.

The order of risk is something like pay monthly contractor accountancy (with degrees of risk varying), annual accountancy for year-end returns only, and DIY with FreeAgent or similar. Pick your position on that spectrum, but bear in mind that the least risky in terms of the MSC legislation is riskier in other regards if you make errors or fail to meet your statutory duties. A reasonable compromise may be year-end accounts only with a local practice (i.e., a one-off annual payment).

great points.

My year end is 31st Jan and the current accountant I am with are also another “online accountant” nb: to my knowledge they are not under investigation, but you never know. My worry now is getting them to file my year end accounts due next year, then I am caught in this predicament again! Of course, if I could turn back time I wouldn’t have engaged with them at all. But it is what it is.

would you think it’ll be wise to get an independent year-end accountant to do my year end for me and basically “sack off” the current accountants, even though I’ve paid enough to them to do my year ends as I have been with them for the past year? I am more than happy to take out 2K to get someone else to do it in the hope that my involvement with said accountant / company wouldn’t be recognised if they didn’t do my year end. Or… does it not really matter, as they’ve been filing my accounts over the 21/22 year on salary, VAT etc.

not sure what constitutes of being involved with said accountant firm if you have not got them to file your year ends?

im just looking at damage limitation more than anything.

[Fred Bloggs]

great points.

My year end is 31st Jan and the current accountant I am with are also another “online accountant” nb: to my knowledge they are not under investigation, but you never know. My worry now is getting them to file my year end accounts due next year, then I am caught in this predicament again! Of course, if I could turn back time I wouldn’t have engaged with them at all. But it is what it is.

would you think it’ll be wise to get an independent year-end accountant to do my year end for me and basically “sack off” the current accountants, even though I’ve paid enough to them to do my year ends as I have been with them for the past year? I am more than happy to take out 2K to get someone else to do it in the hope that my involvement with said accountant / company wouldn’t be recognised if they didn’t do my year end. Or… does it not really matter, as they’ve been filing my accounts over the 21/22 year on salary, VAT etc.

not sure what constitutes of being involved with said accountant firm if you have not got them to file your year ends?

im just looking at damage limitation more than anything.

There's a few unknowns and what ifs in there. Should you wish to change how you do your business book keeping it might be prudent to give your present accountant notice that you're quitting with them at year end. Ask them in writing if they have any past or ongoing HMRC investigations into their practise and file away safely the answer.

If you are using FreeAgent the way forward is extremely easy, just keep using it. If not, set yourself up from year end with a FreeAgent account. (Free of charge with a NatWest group business account). Then engage an accountant to do one off tasks for you as the need arises. The upside to this is that you have to be much more engaged in the day to day operations of your business and you're directly responsible for statutory filings. Which is how it should be anyway. Hope that helps.

[enda1]

Could anyone who has successfully appealed a determination and had their claim accepted and therefore determination dismissed, please attach a redacted version of the letter they sent? I feel the wording of the appeal letter template provided by CK for example could be better.

[rdw1970]

Could anyone who has successfully appealed a determination and had their claim accepted and therefore determination dismissed, please attach a redacted version of the letter they sent? I feel the wording of the appeal letter template provided by CK for example could be better.

I may be wrong but I'd say it's unlikely anyone has had their determination reduced to zero based solely on their appeal without any 3rd party assistance. These will be edge cases where HMRC has made an error (eg the individual was never with Boox\CK or was, but not for the years HMRC issued the Reg 80 for etc). I also understand some individuals have had their Companies struck off as HMRC failed to object to the dissolution again and they have apparently confirmed they will not be pursuing these companies. There are also people on here who took less than 50% of income as dividends and their appeals have been accepted and stood over but not dismissed as HMRC doesn't have the resources to thoroughly examine 2000+ appeals hence they're selecting a handful of cases from each Accountancy firm for a tribunal.

Wow 200 pages.

[GregRickshaw]

Could anyone who has successfully appealed a determination and had their claim accepted and therefore determination dismissed, please attach a redacted version of the letter they sent? I feel the wording of the appeal letter template provided by CK for example could be better.

What you have to remember is; CK and all of the others are not fighting the case for you, if you have paid WTT or DK they are not fighting for you they are merely helping you to appeal the determination (to get it stood over), to appeal the double taxation (conditional claims) and that's it.

CK have done IMHO a great job in giving for free what the others are charing from between £175 and £450 for. Don't be suckered into a group/class action as that is not what is going on with those groups.

Make no mistake here HMRC are not interested in you talking to them to explain your case they want to get this to tribunal and it suits them to wait. HMRC want the FTT and will get it.

The hope you may have is, if your company cannot be MSC due to the way your company operates (eg not a contractor bum on seat, disguised employment etc.,) then HMRC have to release you from the investigation. Again though HMRC have to pointed toward this.

I fully expect absolutely nothing to happen for 2023 and then the fun starts in 2024.

[dochkaian]

I think people are trying to determine their liability and wondering whether expenses are tax free (i.e., expenses that would not be subject to CT under an outside IR35 contract).

The answer is that they are not. The way to estimate the liability is, essentially, to find an inside IR35 calculator and to place the company turnover into that calculator.

Absolutely, it's a matter of estimating the liability. From my understanding for a contract inside IR35 the allowable expenses are a 5% allowance (for the expense of running a limited company) plus any pension payments made by the company, everything else is subject to PAYE / NIC contributions.