We have known for some time that HMRC are tackling avoidance at all levels and, in particular, they have been looking at Managed Service Companies (MSCs). In a very important case, Christianuyi Limited, Fanning Social Care Limited, Haddassah Limited, Dr Jacek Trzaski Limited, Jonny Tooze Physiotherapy Services Limited v The Commissioners For Her Majesty's Revenue & Customs, HMRC.
The owners and sole directors of the appellant companies each provided their professional services to third parties via a personal service company. The question in the appeals was whether the appellant companies were managed service companies within the meaning of the Managed Service Company ("MSC") legislation contained in Chapter 9, Part 2 Income Tax (Earnings and Pensions) Act 2003 15 ("ITEPA"). If the MSC legislation applies to payments that have been received directly or indirectly by the individuals who were the sole directors of the appellants, liabilities to income tax and NICs would arise in respect of which the determinations and notices had been made.
The definition of a "managed service company" is contained in s 61B of ITEPA (inserted by the Finance Act 2007).
The issue before the Tribunal was whether Costelloe Business Services (CBS) was "involved with" the appellants within the meaning of s 61B(2). In this respect, HMRC accepted that CBS did not:
influence or control the provision of the services within the meaning of s 61B(2) (b) or give or promote an undertaking to make good any tax loss within s 61B(2) (b).As such, the argument before the tribunal resolved into a dispute as to whether any of s 61B(2) (a), (c) 5 and (d) were satisfied, in which case CBS would be "involved with" the appellants with the result that they would then be MSCs. A by-product of issues before them turned to a significant extent (but by no means exclusively) on the role played by CBS, had they sidestepped MSC legislation.
The Finance and Tax Tribunal has ruled in favour of HM Revenue & Customs.
