“(1) A company is a “managed service company” if- (a) its business consists wholly or mainly of providing (directly or indirectly) the services of an individual to other persons, (b) payments are made (directly or indirectly) to the individual (or 10 associates of the individual) of an amount equal to the greater part or all of the consideration for the provision of the services, (c) the way in which those payments are made would result in the individual (or associates) receiving payments of an amount (net of tax and national insurance) exceeding that which would be received 15 (net of tax and national insurance) if every payment in respect of the services were employment income of the individual, and (d) a person who carries on a business of promoting or facilitating the use of companies to provide the services of individuals (“an MSC provider”) is involved with the company. 20 2. For the last of these conditions – contained in section 61B(1)(d) – to be met, two requirements have to be satisfied: (1) First, a person must be “involved with the company”
“payroll requirements”. “Payroll requirements” refers to the manner in which CBS’s customers were to be paid out of the companies 10 established on their behalf: (a) The registration form obliged the customer to select (by way of options on the form) payment frequency (“weekly/monthly”) and amount.
“For it is universally conceded that, though it is a pure finding of fact, it may be set aside on grounds which have been stated in various ways but are, I think, fairly summarized by saying that the court should take that course if it appears 25 that the commissioners have acted without any evidence or upon a view of the facts which could not reasonably be entertained. It is for this reason that I thought it right to set out the whole of the facts as they were found by the commissioners in this case. For, having set them out and having read and re-read them with every desire to support the determination if it can reasonably be 30 supported, I find myself quite unable to do so. The primary facts, as they are sometimes called, do not, in my opinion, justify the inference or conclusion which the commissioners have drawn: not only do they not justify it but they lead irresistibly to the opposite inference or conclusion. It is therefore a case in which, whether it be said of the commissioners that their finding is perverse or 35 that they have misdirected themselves in law by a misunderstanding of the statutory language or otherwise, their determination cannot stand.”
“3.1 Chapter 2 described the usual structures of Managed Service Company (MSC) schemes and the way they operate. Features described include: in Composite Companies tens of otherwise unrelated workers hold different 35 classes of shares in the same company; in Managed Personal Service Companies (MPSCs) the scheme provider is the common link between many otherwise unrelated companies of this type; 86 See paragraphs 2.45 and 2.46 of the 2006 Paper. 87 See paragraph 3.7 of the 2006 Paper. 29 the worker in an MSC is generally not a director of the company, although he is a shareholder (an individual in business on his own account through a company would almost invariably be a director of the company); and the MSC usually does not move with the worker as it would if it were really 5 his business. 3.2 But defining MSCs in these functional terms is unlikely to prove robust against attempts to restructure to avoid being caught by the new provisions. The focus is therefore on those characteristics which are core to the MSC business model and which distinguish these structures. It is important to note that some of 10 these individual features may well be present to a greater or lesser degree in other structures; it is the presence of these characteristics in combination that is key to identifying MSC schemes. 3.3 As discussed in Chapter 2, MSCs provide the services of individual workers to end clients, often through a contractual chain involving employment 15 agencies. To this extent, they share some of the characteristics of Personal Service Companies (PSCs). But the presence and role of the MSC scheme provider is a distinguishing characteristic of the MSC. The MSC scheme provider markets MSC structures and makes them available to workers and also has an ongoing role in the administration and management of the company. 20 3.4 MSC scheme providers play a central role in the structure of MSCs by: setting up the companies and allocating individual workers to them; often providing, usually via a nominee company, a company director and a company secretary for the MSC; and often providing corporate directors for hundreds or even thousands of 25 MSCs.”
“D.29 While workers in MSCs are almost invariably not in business on their own account, there may be a limited number of workers who are in business for 15 themselves and using MSCs as a corporate vehicle. These workers would face the on-off compliance cost of moving into Personal Service Companies (PSCs) to avoid paying employed levels of tax and NICs. However, they should not generally face increased costs as the ongoing administrative costs of employing an accountant are lower than the typical fees paid to a scheme provider… 20 D.30 Although the Government’s aim is to target clearly the scope of the measure on MSC schemes some PSCs might face the modest one-off compliance cost of assessing the new measures in order to conclude that they do not apply.”
“We consider that in each case CBS benefited financially on an ongoing basis from the services provided by the individual…The fixed fee per transaction basis of charging was also clearly related to the services provided by the individual. 25 The fee was only charged when a payment was received by the personal service company. Moreover, the fee related to the number of payments received by the client (from the agency) rather than the number of times the payroll had to be run or a payslip produced. Thus, if the client received two payments in one week from the agency, CBS ran one payroll and produced one payslip, but charged 30 two fees. Thus, the fees relates to the number of payments received (which was a factor of the amount of work done by the client) rather than the number of times it had run a payroll or produced a payslip. This, in our view, is a sufficiently close link to establish that CBS benefited “from” the services provided by the individual.” 35 32. This analysis demonstrates that the Tribunal applied a very broad meaning to the wording of section 62B(2)(a) and a commensurately loose causal link between the receipt of benefit by CBS and the provision of services by the individual. If all that is required is that a person only received fees when the individual is working and so has need of the supplier’s services, then all manner 40 of suppliers of goods and services would potentially fall foul of this provision since their receive payments based on the PSC’s consumption of their goods/services, which is likely to arise only when the PSC is conducting its 97 Ground 2 related to the second charging structure and Ground 3 related to the third charging structure. 41 business activities. In particular all payroll service providers would fall within this provision since their fees are determined by the number of payments and so the time taken to process payments received from the employer. The Tribunal’s logic is fundamentally flawed. The reason that CBS earns a fee is because they are providing a service to the PSC (in relation 5 to each payment received by it) and the amount it receives is linked to the amount or value of the service provided and not to the extent, nature or value of the work done by the individual. The fact that CBS receives a fee when the individual works is a natural consequence of the fact that CBS receives fees only when it provides 10 services to the PSC, and it is the individual’s work which generates the payments to the PSCs which creates the need for CBS’s services, and it is for performing those services and the number of times which CBS performs them that determines the amount CBS gets paid and not the amount or value of the services provided by the individual.” 15 77. We consider that both the second and third fee structures fall within the scope of section 61B(2)(a) and that Grounds 2 and 3 must both be dismissed. We reach this conclusion for the following reasons: (1) Section 61B(2)(a) must, obviously, be seen in its context. The question of whether the conditions of this sub-sub-section have been 20 met will only arise if: (a) The company to whom the MSC provider is providing services meets the requirements of sections 61B(1)(a) to (c). In effect, the company must be a personal services company. (b) The services are provided to that company by an MSC 25 provider within the meaning of section 61B(1)(d). Unless these requirements are met, the question of “involvement” simply does not arise. (2) Given these pre-conditions, it is, in our view, not surprising that section 61B(2)(a) is broadly framed. In our judgment, and subject to 30 the limiting words “on an ongoing basis” – which we consider further below – section 61B(2)(a) is sufficiently widely framed so as to include any financial benefit to the MSC provider (or an associate of the MSC provider) arising out of the provision of the services of an individual by a company meeting the requirements of section 35 61B(1)(a), (b) and (c). (3) We reject the contention that section 61B(2)(a) contains any requirement of proportionality or correlation between the amounts earned as a result of the provision of the services of the individual and the extent of the financial benefit to the MSC provider. Section 40 61B(2)(a) contains no such requirement on its face, and we see no reason to imply such a requirement. That, we consider, would be an open invitation to precisely the sort of evasion that Parliament 42 would have been astute to avoid. Indeed, on the Appellant’s case, all that would be required to ensure that CBS was not “involved” with the Appellants was a relatively minor change in the way in which CBS charged for its services.
“…As regards Dr. Osamwonyi and Ms. Fanning, no Registration Forms were produced in evidence. We therefore do not know as regards [these 10 Appellants] whether their directors authorised the payment of salaries in respect of the minimum wage on the Registration Form. Dr. Osamwonyi’s evidence, however, was that he left it to CBS to determine how he was paid.”
“…we consider that CBS influenced the manner in which the appellant companies paid their taxes. CBS would receive an email notification when 104 See Re Duomatic Ltd[1969] 2 Ch 365 at 373 (per Buckley J). 105 Decision at [316] to [317]. 49 a payment was made into one of its client’s CredEcard accounts. The amount of taxes would then be deducted by CBS every time a payroll was processed. The result was that the appellants paid away amounts in respect of taxes well before the statutory due dates for payment to HMRC. In our view, the acceleration of the appellants’ tax payments 5 constituted CBS influencing their finances.”