Boox responds to MSC investigation by HMRC, slamming it as 'misguided'

Boox has responded to HMRC assessments which charge both the accountancy firm and its contractor limited company clients of breaching the Managed Service Company legislation.

But more than just respond – The App Accounting Group (AAG) is going on the offensive, cueing up both its appeal to HMRC, and appeals it has already lodged for the accused PSCs.

The group, which owns Boox, says HMRC is “misguided”; has made “fundamental mistakes” in its protective assessments, and has no “technical basis” for the determinations.

'Submit an appeal'

“[The Revenue] themselves state [the determinations] are prepared on a ‘best judgement’ [basis], and that they continue to fact-find,” AAG’s director Christopher Clark told ContractorUK.

“Where HMRC have provided us with details of the clients affected, we have written to them and recommended that they either submit an appeal to HMRC directly or instruct us to”.

Clark added that Boox advisers have unearthed “a number of inaccuracies and data breaches” by HMRC which, separately, has also accused Churchill Knight of breaching MSC rules.

“Letters have been issued to our clients which refer to another accounting practice,” Clark said, not naming Churchill Knight yet no other firm is known to be under MSC investigation.

'HMRC will hit more accountants -- obviously'

But the taxman will “obviously” accuse more contractor accountancy firms of breaching the 2007 legislation, if he succeeds with the current two, says WTT Consulting’s Thomas Wallace.

Writing today exclusively for ContractorUK, Mr Wallace says even if HMRC does extend what’s already set to be a “long” campaign, the litmus test for PSCs will always be the same.

“The key to understanding the risk of falling into the MSC rules is being clear that YOU controlled YOUR company,” the former tax inspector writes.

“And [making sure] that the services of the accountant or service provider [which your PSC used] were no more than the usual professional services on offer.”

'Contagion for all providers'

Crawford Temple, of compliance group Professional Passport agrees swift resolution for affected accountants -- and contractors, is almost the only certainty of the HMRC crackdown.

The compliance group’s chief executive, Mr Temple told ContractorUK: “It is clear that this is a strategy that HMRC is intent on pursuing.

“The implication of these cases could have significant ramifications for all accountancy service providers across the market if HMRC succeeds. And it could create contagion for all providers.”

In an acknowledgement to the potentially long “queue” (as one accountant has put it) of all those who could receive Regulation 80 notices; Qdos has changed its stance.

'Unprecedented HMRC activity'

Writing on a ContractorUK Forum thread for MSC breach notice recipients, Qdos Seb Maley said:

“We are naturally aware of this developing situation. We currently exclude MSC enquiries from our TEI and TLC policies -- see exclusion general exclusion 13 for reference.

“However, HMRC’s recent activity is unprecedented and we appreciate there are now numerous contractors seeking assistance.

“We are therefore committing to support any existing tax policyholders who have received an MSC letter from HMRC without charge while we review our policy wording.”

'Contractors risk being left to deal with IR35 challenge'

Former tax inspector Carolyn Walsh says there could be good reason for IR35 advisories (which Qdos primarily is); to step in.

“The appeals [by the two accountancy firms under MSC investigation by HMRC] may or may not be successful,” she began.

“If it is successful the accountancy service provider is freed from involvement. But the contractor would be deemed to be a PSC and would then be left to deal with an IR35 challenge. What happens then?”

'Little correlation'

In response to an online news report that conflated exposure to the MSC legislation with exposure to the IR35 legislation, WTT’s Mr Wallace spoke of there being “little correlation other than it [IR35] also targets those providing services through an intermediary.”

In his ContractorUK piece today however, the tax dispute advisory’s head of investigations acknowledges an ‘out-of-the-frying pan-into-the-fire’ risk for PSCs.

And he stipulates that demonstrating a lack of control – one part of the trinity of IR35 status factors – is key to successfully defending an HMRC assessment under the MSC legislation.

'Completely spurious determinations from HMRC'

But to read Mr Clark’s statement on behalf of Boox/AAG, it seems the best form of defence is attack.

“Letters have been issued [by HMRC] to companies that were not incorporated at 5th April 2018,” the Boox director complained.

“[Furthermore] letters have been issued [by HMRC] to companies that have been dissolved. [And HMRC] letters have been issued where the named individual is not an employee, director or shareholder of the company and disclosed personal data.”

Mr Clark added: “We are continuing to work with our advisors to assist our clients to have these assessments cancelled. In the meantime, we urge clients who have received such letters from HMRC, not to ignore them but to work with us to fight these completely spurious determinations.”