Service Company Question in Personal Self assessment

[LisaContractorUmbrella]

Exact wording was "In relation to IR35, it was noted the two part question 6 currently asked on the P35 will be merged into one “Are you a service company who has operated the Intermediaries legislation (sometimes known as IR35) or the Managed Service Companies legislation?”. The question will be embedded into the PAYE regulations for 2013/14 and it will become a legal requirement to answer it on the last return for the tax year"

So yes you may be right - depends on what they mean by 'embedded' I suppose (nice and clear as usual) As I understand it, if you answer yes an IR35 investigation will automatically be triggered making life easier for those lovely folks at HMRC

[Jessica@WhiteFieldTax]

Yes, that rings a bell.

I think the problem is with "operated".

You could interpret "operated" as considering yourself IR35 caught and paying a compliant salary.

Or, in extremis could applying the status tests and deciding that you were outside as IR35 be "operated" - in which case it's a red flag question.

Hopefully the IR35 forum will elicit some guidance on this.

[LisaContractorUmbrella]

Yes, that rings a bell.

I think the problem is with "operated".

You could interpret "operated" as considering yourself IR35 caught and paying a compliant salary.

Or, in extremis could applying the status tests and deciding that you were outside as IR35 be "operated" - in which case it's a red flag question.

Hopefully the IR35 forum will elicit some guidance on this.

I think we all know what they mean but, as usual, it is pretty badly worded. There don't seem to be any IR35 forum minutes available on the HMR&C website after July but I am fairly sure there has been a meeting since

[Jessica@WhiteFieldTax]

Yep, I notice the absence of minutes as well.

I'ld agree there is a common sense interpretation, but, well, it is disconcerting we have to rely on common sense

Plus ça change

[v5srv]

With respect to the question on the SA form it appears to be clear enough that the provider of the service needs to enter gross dividends + salary into the box under "Service Companies".

However with regard to the significant other - the company secretary - my reading is that a zero entry is correct. Guidance found elsewhere states ...

Eric is a tax consultant. He trades through Eric Ltd. The whole of Eric Ltd's income is derived from work which Eric performs personally. Eric Ltd is not caught by IR35. 50% of the shares in Eric Ltd are owned by Fiona, Eric's wife.

Eric Ltd is a 'service company' in relation to Eric and the total remuneration and dividends which Eric receives from Eric Ltd should be shown in the 'service company' box (as well as being shown in the appropriate boxes elsewhere on the return). However, Eric Ltd is not a 'service company' in relation to Fiona. Therefore the income which Fiona derives from Eric Ltd should not be shown in the 'service company' box on either her own or Eric's tax return (it does of course need to be shown as income in the appropriate reporting boxes of Fiona's tax return).

Despite being a poor company name (!!) does the forum concur that this is the correct approach. Our accountant has entered a gross dividend + salary figure on both of our SA's - correct for me but not for the other half in my opinion.

[Craig at Nixon Williams]

Despite being a poor company name (!!) does the forum concur that this is the correct approach. Our accountant has entered a gross dividend + salary figure on both of our SA's - correct for me but not for the other half in my opinion.

You are correct, it should only appear on your return if you were the only one providing your services through the company. The second shareholder doesn't need to complete this box.

Hope this helps!
Craig

[SimonMac]

As I understand it the declaration of your IR35 status on your self-assessment is mandatory and stating you are outside will then result in a letter asking you to prove it

What would be deemed as acceptable proof?

Will correspondence from a IR35 Contract Review be enough?

[TheCyclingProgrammer]

With P35s no longer used at the end of the year due to RTI, where would this service companies/IR35 question now be asked?

[Craig at Nixon Williams]

With P35s no longer used at the end of the year due to RTI, where would this service companies/IR35 question now be asked?

The service company question is asked on the final RTI submission of the year, but it is now a single question rather than two.

The question on the self-assessment about service company income will not be changing, as far as I know...

Hope this helps!
Craig

[TheCyclingProgrammer]

The service company question is asked on the final RTI submission of the year, but it is now a single question rather than two.

The question on the self-assessment about service company income will not be changing, as far as I know...

Hope this helps!
Craig

Thanks. So in your opinion if we previously answered YES/NO do we just answer NO this year?

Looking at this:
http://www.hmrc.gov.uk/rti/ir35.pdf

My interpretation of the final point under Reporting Arrangements is that HMRC only want you to answer YES if you are caught by IR35.