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

[Bruce88]

In case anyone has missed this…

How Boox’s ‘MSC contractors’ should deal with an HMRC Standstill Agreement


https://www.contractoruk.com/news/00...agreement.html

I also find this article a little confusing

’As HMRC is gearing up to extend the period of its enquiries beyond six years, it is clearly deeming the cases, if proven, to be cases of ‘deliberate error’ on the part of the taxpayer.’

I don’t quite understand this statement. I believe the ’standstill agreements’ are to simply protect the HMRC claim to NI liabilities, as the tribunals may well extend beyond the six-year period for collection.

’MSC legislation leads by default to a failure to pay the correct amount of PAYE (tax and NICs) which is automatically deemed to be a deliberate error.’’

Just because the correct amount of PAYE has not been paid does not ’automatically’ mean this is a deliberate error. I can see nowhere within the MSC legislation or guidance where this is stated. To prove deliberate behaviour requires a greater burden of proof, and the onus would be on the HMRC to make this case.

Also the original determinations sent out by HMRC went back 4 years, which is the time limit to claim unpaid PAYE tax (under reg 80) which is not due to 'careless or deliberate error'. This gives the impression that HMRC have not suggested deliberate error in this case.

[woody1]

As far as I know, there's likely no penalty in the event that MSC applies, as nobody thought their companies were MSCs (and actually I expect we'll find that they weren't MSCs). Does this sound right?

Yes. And in fact, hasn't HMRC already conceded that some companies were not MSCs?

It would be interesting to know whether Christianuyi et al incurred penalties, as this was a pretty blatant MSC tax avoidance scheme concocted by CBS.

https://www.ipse.co.uk/ipse-news/ips...-business.html

[jamesbrown]

I agree that the article is a little confused. It's unclear where the author got this information, but it's worth remembering that HMRC's position typically goes to 11 at the outset and tribunal judges can, and often do, take a different view.

Regarding legislation and ordering, the order of precedence is the onshore intermediaries/agency legislation, then MSC then IR35, but I'm not really sure what (sensible) point is being made by the author in that regard (sounds like something a non-legal HMRC person might have briefed). There is no need to use the backstop of other legislation in demonstrating deliberate behavior with regard to avoiding tax under the legislation in point, that is incoherent. What matters is whether, first, there was an MSCP "involved with" the contractor company (MSC) and, second (in terms of penalties on top of the tax avoided), whether that relationship was sought deliberately to avoid tax that was known to be owed.

[PurelyBlue]

I did, and found it a bit muddled.

I also think the repeated references to "70% penalties" were a bit alarmist. Even if a Tribunal ultimately finds that CK and Boox were MSCPs, I think it's a bit of a stretch to imply that the contractors knowingly/deliberately used an MSC.

Yes, I agree, and I'd like to repost my comment from slightly earlier in the thread since it may have been missed and I'd be interested if anyone has answers to my questions...

Reading this article just posted on ContractorUK: https://www.contractoruk.com/news/00...agreement.html

It says:

MSC legislation leads by default to a failure to pay the correct amount of PAYE (tax and NICs) which is automatically deemed to be a ‘deliberate error.’

This sounds incorrect, and seems to completely undermine the concept of 'deliberate'. The article then uses that logic to conclude that 70% penalties could apply.

As far as I know, there's likely no penalty in the event that MSC applies, as nobody thought their companies were MSCs (and actually I expect we'll find that they weren't MSCs). Does this sound right?

Another quote:

Where a taxpayer was an agency worker in the relevant tax year, or where HMRC considers that IR35 applied in the relevant tax year, HMRC considers the use of an MSC provider to be a deliberate action, knowingly undertaken to avoid paying PAYE, either as an agency worker or under IR35.

Aren't these completely separate parts of the legislation? I thought that either one applies or the other (and MSC has precedence).

[woody1]

Please read the link shared above for a better understanding

I did, and found it a bit muddled.

I also think the repeated references to "70% penalties" were a bit alarmist. Even if a Tribunal ultimately finds that CK and Boox were MSCPs, I think it's a bit of a stretch to imply that the contractors knowingly/deliberately used an MSC.

[ritwolf]

I thought the standstill agreement was just about NICs?

See "Protective claims and standstill agreements":

https://www.wrighthassall.co.uk/know...ill-agreements

My understanding is, if you don't enter the agreement, then HMRC will have to take you to County Court to protect their position viz-a-viz the 6-year Limitation Act 1980.

https://www.gov.uk/hmrc-internal-man...ing/dmbm527120

Yes, that's part of it. Please read the link shared above for a better understanding

[woody1]

I thought the standstill agreement was just about NICs?

See "Protective claims and standstill agreements":

https://www.wrighthassall.co.uk/know...ill-agreements

My understanding is, if you don't enter the agreement, then HMRC will have to take you to County Court to protect their position viz-a-viz the 6-year Limitation Act 1980.

https://www.gov.uk/hmrc-internal-man...ing/dmbm527120

[ritwolf]

Hello everyone,

I've received the long-awaited standstill agreement, and after reading the discussions here, it seems that the general consensus leans towards agreeing with it. I also understand that everyone's situation is unique, so the outcome may vary to some extent.

That being said, earlier this year, I made a payment on account to cover all the outstanding figures. When I made these payments, I believed and still believe that interest would not accrue from that point onward. Given this, does it still make sense for me to enter into a standstill agreement? I have a hunch about the answer, but I'd appreciate your honest opinion. Thank you.

If I understand the latest info correctly:

What you have paid on account so far is the tax that HMRC deems to be liable, plus interest on that amount. On top of that amount, if HMRC wins you'll be fined (up to 70% of the tax liability). By accepting the agreement, you are cooperating so that the 70% fine (on top of the liability) is reduced.

FOr more info, please check the article someone shared a few posts above.

[jimmyoyang]

Hello everyone,

I've received the long-awaited standstill agreement, and after reading the discussions here, it seems that the general consensus leans towards agreeing with it. I also understand that everyone's situation is unique, so the outcome may vary to some extent.

That being said, earlier this year, I made a payment on account to cover all the outstanding figures. When I made these payments, I believed and still believe that interest would not accrue from that point onward. Given this, does it still make sense for me to enter into a standstill agreement? I have a hunch about the answer, but I'd appreciate your honest opinion. Thank you.

[WTFH]

When is the HMRC's NICs recovery window deadline for tax year 2017/2018? Is it end of March, 2024 or a different, arbitrary date?

In theory, if it's just 17/18 and no other years after that, then you'd expect it to be April 2024.
In practice, you'd need to get a professional tax adviser to go through your situation and work out what is going on.

[gikap]

When is the HMRC's NICs recovery window deadline for tax year 2017/2018? Is it end of March, 2024 or a different, arbitrary date?

[cojak]

In case anyone has missed this…

How Boox’s ‘MSC contractors’ should deal with an HMRC Standstill Agreement


https://www.contractoruk.com/news/00...agreement.html

[ritwolf]

Having received the Section 8 Notice yesterday along with the Standstill agreement.

What action are others taking on the Standstill agreement? It appears there is no choice but to enter it, or am I missing something . .. I probably am . .

Yes, someone shared a link previously explaining how we almost have no other option.

On the other hand, I find it unfairly convenient for HMRC and contradictory that, as directors of our companies, we are the ones who will take the decision to agree/disagree with the Standstill Agreement offered by HMRC, but then we are being told we didn't have control. Why send the offer to us and not to the MSCP then?

[nekro]

I'm looking for recommendations from anyone on the forum who has or is using any tax specialists/advisors or tax solicitors who can provide tailored advice regarding the Boox MSC saga and have provided a clear roadmap to navigate out of this or at the very least reduce the financial impact. The current advisor I am using only offers a generic appeal and requires someone more on the ball with this situation.

WTT

[jamesbrown]

My understanding is that the debit if not paid from the company it then transferred to the director. Therefore what is the point of opening a new company? Please correct me

The transfer of debt rules within ITEPA Part 2 Ch. 9 are draconian, it's true, but they will need to engage that process. The Reg 80 itself falls on the company. It seems sensible to start afresh with a new company, but it definitely isn't a magical solution to avoid the original liability.