In Christianuyi Limited & Others v HMRC [2018] UKUT10  the Upper Tribunal agreed that a Managed Service Company (MSC) Provider was ‘involved’ with the taxpayers' personal service companies and was subject to the MSC rules.

Upholding the 2016 decision of First Tier Tribunal (FTT) it is expected that the resulting tax bill will run to several million pounds.

S61B ITEPA 2003 sets out the meaning of a “managed service company” with s61B(2)(a) – (e),detailing the requirements for an MSC provider to be involved with the personal service company.

  • In 2007 the i4 group, including Costelloe Building Services Limited (CBS) developed a new product for use by Personal service companies (PSCs).
  • CBS assisted in setting up the PSCs; each was solely owned by an individual client who also acted as director with most PSCs using the address of CBS as their registered office and a group company as company secretary.
  • Amounts received from third parties for clients’ work were paid into special bank accounts which CBS set up and CBS made deductions from these accounts for their fees and taxes.
  • The vast majority of clients opted to be paid a minimum wage by their company.  The balance of funds in the PSC account was then transferred to their private bank accounts as dividends.

The FTT held that CBS:

  • Benefitted financially on an ongoing basis from the provision of services by their clients. 
  • Controlled or influenced the way in which payments were made to each individual taxpayer
  • Influenced the PSCs’ finances and activities in respect of bank accounts, tax payments, and access to their funds without having a direct debit in place.
  • As a result CBS was 'involved' with the PSCs and the MSC rules applied.

The taxpayers appealed to the UT on ten grounds including:

  • The FTT erred in law in holding that Parliamentary and governmental materials could not be used to identify the mischief at which the legislation was aimed or as an aid to statutory construction.
  • The FTT erred in law in holding that sections 61B(2)(a), (c) and (d) of ITEPA, or any of them were satisfied in the case.
  • They should be granted permission to resile from their admission before the FTT that CBS was an MSC provider within the meaning of section 61B(1)(d) leaving this question still be dealt with.

The Upper Tribunal in dismissing the appeal found:

  • The FTT had not erred in dismissing the parliamentary and government materials; they were of little help and the appellants had not clearly stated the ambiguities in the legislation with which such materials were needed to provide assistance. The appellants were criticised for attempting to have the tribunal construe such materials instead of the legislation which the UTT felt was clear and unambiguous.
  • CBS could resile from their admission that they were an MSC provider and the court would consider this point. Part of the reasoning behind this was that it was the first case to deal with the construction of s61B ITEPA and would provide guidance for future cases.
  • Though disagreeing with the FTT about the deductions of tax made by CBS which they said were simply a service offered and accepted, the UTT agreed that CBS met the conditions of s61B(2)(a) (c) and (d) and therefore was involved with the PSCs.


Despite the UTT wanting to set a precedent for future cases the decision did not get very far in considering the judicial interpretation of the MSC rules. They would not be drawn into debating whether, for example, a payroll services provider might fall within the rules, and as the legal and accounting exemption was not sought this was also not discussed. It is therefore largely a decision on the facts only.


Christianuyi Limited & Others v HMRC [2018] UKUT10  

Christianuyi Limited & Others v HMRC [2016] TC05045

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