Churchill Knight & Boox clients being investigated as Managed Service Companies

[ritwolf]

That may be HMRC's position, but it isn't what the legislation says, notably:



And:



And:

Thanks, this is my understanding at the moment as well, but it's more helpful to see the relevant legislation.

[RightAngle]

Where thhe article says:



I think this is the only wrong bit I see in the article. My understanding (also from previous posts in this thread) is that the PAYE and NIC is levied on income earned by the contractor, not by the business.

Unless I'm missing something of course, but I really hope I'm right here.

Another point which I have also found to be overlooked is when something like this is stated in the article: HMRC said: “People who work like employees must pay tax like employees."

I appreciate the position that HMRC has taken with regard to paying taxes like employees. However, if you pay like an employee then you should also be treated like an employee with all the bells, whistles, and benefits that go with that role. HMRC may choose to work in a vacuum because they are not focusing on employment law and are only focusing on recouping tax. However, I believe that the assumption of being deemed to work as an employee has other consequences that need to be looked at more closely. Just my two cents and I am probably hoping for too much!

[Bruce88]

[QUOTE=RightAngle;n4268325]

Another point which I have also found to be overlooked is when something like this is stated in the article: HMRC said: “People who work like employees must pay tax like employees."

This encapsulates the HMRC approach to this case and is mentioned in the FT article i.e. up to now it's just been succession of generic statements and buzz phrases. They have been very reluctant to deal with the specifics of individual cases in detail.

[eek]

They have been very reluctant to deal with the specifics of individual cases in detail.

Because in most cases the specifics aren't relevant.

Remember that the whole point of Chapter 9 is that it works on a group / global basis it's not like the old IR35 world where every contract of every contractor is a completely new case. Here the point is that were it not for Churchill Knight / Boox doing "all the work required to run a limited company" you would have been an employee / umbrella work paying being paid under PAYE.

The bits in "" are there to show that I know that isn't what CK / Boox did but it's what HMRC are arguing that they did.

[Bruce88]

Because in most cases the specifics aren't relevant.

Remember that the whole point of Chapter 9 is that it works on a group / global basis it's not like the old IR35 world where every contract of every contractor is a completely new case. Here the point is that were it not for Churchill Knight / Boox doing "all the work required to run a limited company" you would have been an employee / umbrella work paying being paid under PAYE.

The bits in "" are there to show that I know that isn't what CK / Boox did but it's what HMRC are arguing that they did.

This appears to be the HMRC approach up to now, but their own internal guidance 'ESM3520' on applying MSC legislation states the following:

'Simply because a person is an MSC Provider does not necessarily mean that their client companies
are Managed Service Companies’

‘Even where some client companies are Managed Service Companies because an MSC Provider (or
their associate) is involved with those companies, it does not necessarily follow that all client
companies are MSCs if the relationship between the MSC Provider/associate and their clients is
demonstrably different.’

The obvious conclusion from this is that they must view each case separately to appraise the individual working relationship between alleged MSCP and client.

[jamesbrown]

True, but we know that they don't follow their own internal guidance.

We can criticise their approach, but we can't be surprised about it. Create a threadbare case to be revised prior to tribunal when the people that actually know what they're doing have looked at it, issue all the Reg 80 determinations before the next deadline, sit back and wait. It really is that simple.

[GregRickshaw]

I'm probably wrong but in my opinion HMRC were probably shocked when they got the responses from CK's clients, when they (HMRC) realised the one size fits all blanket they had applied to CK was so far from what they had been led to believe.

Anyone remember the 'from conversations with clients..' which was included in the captures?

The reason I think this is because Boox clients who got involved (received letters) much later were given very detailed descriptions on how they were a MSC, whereas the CK letters continued to be the four captures and no extra detail.

Certainly CK didn't seem to have such a hands on approach than Boox did, we all remember the infamous YouTube Boox video. Some of CK's vernacular on their website wasn't helpful in their package products though.

[Lotok]

I'm probably wrong but in my opinion HMRC were probably shocked when they got the responses from CK's clients, when they (HMRC) realised the one size fits all blanket they had applied to CK was so far from what they had been led to believe.

Anyone remember the 'from conversations with clients..' which was included in the captures?

The reason I think this is because Boox clients who got involved (received letters) much later were given very detailed descriptions on how they were a MSC, whereas the CK letters continued to be the four captures and no extra detail.

Certainly CK didn't seem to have such a hands on approach than Boox did, we all remember the infamous YouTube Boox video. Some of CK's vernacular on their website wasn't helpful in their package products though.

I dont remember the Boox video, but I wonder if it depends on when you signed up with them. I had used Boox nearly 9 years. They did register the business for me at my request, but other than that they just calculated my Corp tax and did my submissions. I don't know what other more hands on services they offered. got a link to the video?

But maybe HMRC need to consider what services each client had from them.

[jamesbrown]

I think that video is long gone.

Unfortunately, they will definitely use registration of the company in building their case against you.

Any updates on the pending tribunal case(s), GR? As I recall, they were moving along quicker than originally anticipated.

[GregRickshaw]

I think that video is long gone.

Unfortunately, they will definitely use registration of the company in building their case against you.

Any updates on the pending tribunal case(s), GR? As I recall, they were moving along quicker than originally anticipated.

Last we heard JB was the deadline for meeting and deciding the test cases was July 31st (2023) from what we know the CK LTDs had been chosen to CK's (and their lawyers) satisfaction and also to HMRCs satisfaction (read into that what you will).

There were a few spanners in the works (cases heading for tribunal) however HMRC have agreed to hear those after the main cases.

We all await the next update from CK which I suspect will be the BIG one.