Reply to: Churchill Knight & Boox clients being investigated as Managed Service Companies

[Guy Incognito]

I'd like to remind anyone who think they may have paid themselves less than 50% of the company's revenue in any year to consult your tax lawyer as HMRC's demand can be killed that way. Qdos sent them the evidence of me withdrawing less than 50% during the year in question and eventually HMRC accepted it, set the liability to nil and I've since closed the company.

You don't need assistance, I did this myself for one of my three years.

[woody1]

I'd like to remind anyone who think they may have paid themselves less than 50% of the company's revenue in any year to consult your tax lawyer as HMRC's demand can be killed that way. Qdos sent them the evidence of me withdrawing less than 50% during the year in question and eventually HMRC accepted it, set the liability to nil and I've since closed the company.

Might also be worth bearing in mind for anyone, currently with an accountancy provider, who they fear may also be vulnerable to a future MSC attack. Taking less than 50% seems to be the only sure-fire defence.

[praxeologist]

I'd like to remind anyone who think they may have paid themselves less than 50% of the company's revenue in any year to consult your tax lawyer as HMRC's demand can be killed that way. Qdos sent them the evidence of me withdrawing less than 50% during the year in question and eventually HMRC accepted it, set the liability to nil and I've since closed the company.

[rdw1970]

It makes you wonder how much HMRC actually stand to claw back from this raid.

I suspect a tiny amount compared to dodgy schemes.

As others have previously said, it's not just about the money. A tribunal win for HMRC would make it easier for them to pursue other cases in the future and would create a strong deterrent to other contractors who follow the low salary/high dividend model with similar accountancy firms to Boox and CK.

[woody1]

It makes you wonder how much HMRC actually stand to claw back from this raid.

I suspect a tiny amount compared to dodgy schemes.

[Bruce88]

What did they apply in regards to interest on top of the amount they were claiming from you and what interest was given on the overpayments. Was there a difference?

TBH I haven't received the final calculation to see how they applied interest payments. It was sent to my agent and hasn't been forwarded to me yet. I just received a final amount which tied in close to my calculations and as previously stated the overpayments pretty much covered the tax and NI owed so I accepted it to allow the case to be closed. The remaining balance was negligible.

The process was I received the revised calculations for tax and NI owed without the addition of interest payments. You have 30 days to appeal this calculation after which this settlement becomes final. After the 30 days you can submit separate claims for both CT and dividend tax over payment relief, which you calculate. These overpayment reliefs were also submitted without the addition of interest payments.

I assume interest payments are only applied to the outstanding balance once HMRC have verified the overpayment calculation. Once I receive this final calculation from my agent I'll confirm.

[Lotok]

I've managed to settle my case with the HMRC, I thought I'd share my experience.

My first two years were removed from the investigation as I didn't pay myself much from the business, which meant I didn't meet either 61B(1)(b) or 61B(1)(c). Only the final year came under consideration.

HMRC consider pension contributions to be 'payments to the individual' for the purposes of meeting 61B(1)(b) but do not include these contributions in the DEP calculation as they do not consider them as 'general earnings from employment'. Allowable business expenses were also deductible from the DEP total.

Once the DEP calculation was complete, I had to submit separate claims for corporation and dividend tax overpayments. However, I didn't have to pay the outstanding bill and wait for separate overpayment refunds, rather the overpayments were included in the calculation for the final outstanding payment.

No penalties were applied.

During the tax year in question my total income didn't exceed the higher tax rate threshold, I didn't split dividends with anyone else and I made significant pension contributions. So my personal circumstances meant that the overpayments pretty much wiped out the total outstanding tax and NI bill.

Being honest, once I made it known to the HMRC that I would be willing to come to a figure and settle, the individual officer I dealt with was quite reasonable and we resolved the matter fairly amicably.

What did they apply in regards to interest on top of the amount they were claiming from you and what interest was given on the overpayments. Was there a difference?

[Bruce88]

I've managed to settle my case with the HMRC, I thought I'd share my experience.

My first two years were removed from the investigation as I didn't pay myself much from the business, which meant I didn't meet either 61B(1)(b) or 61B(1)(c). Only the final year came under consideration.

HMRC consider pension contributions to be 'payments to the individual' for the purposes of meeting 61B(1)(b) but do not include these contributions in the DEP calculation as they do not consider them as 'general earnings from employment'. Allowable business expenses were also deductible from the DEP total.

Once the DEP calculation was complete, I had to submit separate claims for corporation and dividend tax overpayments. However, I didn't have to pay the outstanding bill and wait for separate overpayment refunds, rather the overpayments were included in the calculation for the final outstanding payment.

No penalties were applied.

During the tax year in question my total income didn't exceed the higher tax rate threshold, I didn't split dividends with anyone else and I made significant pension contributions. So my personal circumstances meant that the overpayments pretty much wiped out the total outstanding tax and NI bill.

Being honest, once I made it known to the HMRC that I would be willing to come to a figure and settle, the individual officer I dealt with was quite reasonable and we resolved the matter fairly amicably.

[rdw1970]

HMRC have pushed dates back as their council got the dates wrong.

They are scrambling..maybe

Surely they have to stop the interest accruing now.

This is only for Churchill Knight, still no dates for Boox yet.

[dayd08]

HMRC have pushed dates back as their council got the dates wrong.

They are scrambling..maybe

Surely they have to stop the interest accruing now.

[cojak]

[Lotok]

I wouldn’t trust ChatGpt as far as I could spit, and you can guess how much I think the odds are.

[cojak]

I wouldn’t trust ChatGpt as far as I could spit, and you can guess how much I think the odds are.

[RightAngle]

Hi everyone,

So I asked ChatGPT the other day what would be the likelihood of HMRC winning the MSC case. It provided me a figure ranging from 60-70% based on the information which it has to base its answers.

No idea how ChatGPT came to this conclusion but I found this quite interesting and just wanted to share.

What do you all think about this? Would you put the odds of HMRC winning as something different?

[woody1]

As a story, it will only gain any traction if HMRC lose in court. Plenty of MPs would be lining up to give them a good kicking for overreaching their powers, persecuting contractors (yet again), wasting public money etc.

That's a very big "if" of course.