In Christianuyi Limited & Others v HMRC [2019] WECA Civ 474  the Court of Appeal confirmed that the UT and FTT were correct in finding that a business (Costello Building Services Limited - 'Costello') which was set up to facilitate workers to provide their services via managed personal service companies was a Managed Service Company (MSC) provider.

This upheld the 2018 decision of Upper Tribunal (UT) which had concluded:

    "Section 61B(1)(d) sets out a perfectly straightforward, two stage, test for determining whether a company is or is not an MSC provider:
    (a) First, does the putative MSC provider promote or facilitate the use of a company?
    (b) Secondly, if so, does that company provide the services of individuals?"

Applying that test, the UT held that it was plain that Costelloe fell within the statutory definition.

The matter on appeal:

It was contended that the definition of a Managed Service Company (MSC) provider as "a person who carries on a business of promoting or facilitating the use of companies to provide the services of individuals" could either mean:

    (1) HMRC's construction: that, in order for a company to be an MSC provider, the company's business must be the business of promoting or facilitating the use by individuals of companies through which the individuals will provide their services to clients; the putative MSC provider does not need also to promote or facilitate the services themselves;
    (2) The Appellants' construction: that, in order to be an MSC provider, a company must promote or facilitate the services provided by the companies the use of which it has promoted or facilitated.

It was common ground that Costelloe did not promote or facilitate the services that each of the individual owners provided to the Appellants' end clients. Each Appellant arranged and negotiated its own contracts, including payment rates and terms, with the end clients, sometimes through a recruitment agency but without any control or supervision by Costelloe.

The Appellants' main argument in support of their appeal was that HMRC's construction casts the net of Chapter 9 far too wide and would catch all sorts of people who provide services to companies if it so happened that those companies were personal service companies providing the services of an individual to end clients. The position would partly be mitigated by the express carve out provisions in section 61B(3) and (4) which are:

    (3) A person does not fall within subsection (1)(d) merely by virtue of providing legal or accountancy services in a professional capacity.
    (4) A person does not fall within subsection (1)(d) merely by virtue of carrying on a business consisting only of placing individuals with persons who wish to obtain their services (including by contracting with companies which provide their services).

The Court of Appeal considered the earlier appeals, the legislation, guideance and consultation documents and outcomes and concluded that:

  1. There is nothing either in the wording of Chapter 9 ITEPA or in the external material on which the Appellants rely that supports their construction of the definition of an MSC provider in section 61B(1)(d).
  2. The business that the Government was trying to catch in the definition is precisely the business that Costelloe runs; its business is in promoting a situation in which the workers provide their services through a company instead of directly to the end client and it thereby promotes the use of companies to provide those services. Costelloe then provides the Gold Business Service to the MSC, thereby facilitating the use of the MSC by that individual in order for him or her to provide services to the end client.
  3. There is no doubt that this business is what the legislation is aimed at catching and in my judgment it succeeds in its aim.

Background, FTT and UT findings

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.

The FTT held that CBS:

The taxpayers appealed to the UT on ten grounds including:

The Upper Tribunal in dismissing the appeal found:


The Court of Appeal were quite clear that the MSC regime is an anti-avoidance regime and it was designed to catch the arrangements made by Costello.

UPDATE: Leave for appeal to the Supreme Court was denied in December 2019 making the Court of Appeal decision the final decision.


Christianuyi Limited & Others v HMRC [2019] WECA Civ 474

Christianuyi Limited & Others v HMRC [2018] UKUT10  

Christianuyi Limited & Others v HMRC [2016] TC05045

Our subscriber guides: IR35 and Managed Service Companies.



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