Service Companies question in 2011 Personal Tax Assessment

[Fred Bloggs]

Hmmm, interesting thread. My accountant files the P35 for me and I don't really look at them, until now. I have taken a look and the question is answered "No". I have asked the accountant under what circumstances would the answer be "Yes" and that he is sure the answer is "No". I will file the answer away for the future. We have never had a discussion with the accountant about this question. I am not an MSC I am a Ltd Co with one director. I hope this would be enough to show we have considered it.

[Taxless]

Fred, it looks like HMRC do not agree that this is sufficient to avoid being caught by the MSC legislation.

See under "HMRC's position" in the following link.

HM Revenue & Customs: How sure are you that your company is not a Managed Service Company (MSC)?

[Fred Bloggs]

Hmm, now that is a lot different to what I understood an MSC to be. I understood that an MSC was the old "Brookson" composite company type arrangement. The "intermediary" referred to is my Ltd Co then? That link to the HMRC seems to be casting a much wider net than I had understood. IIRC, the MSC legislation when it was introduced had a list of tests to determine if you were an MSC or not. AAIUI, Ltd Co contractors didn't meet those tests.

[Taxless]

As I said, maybe this area is a little more complex than some think and it might well be worth the input of a professional adviser.

This is of course HMRC's interpretation, it doesn't mean they are correct.

HMRC's recent targets were to raise an extra £4bn in the year to 2011, rising to an extra £7bn per year by 2015 and so I think all business sectors have a lot to be worried about going forward. In this climate, where HMRC have a stated policy/interpretation, there must be a chance that they will look to test this, particularly if they think it could help make some inroads into their fairly challenging targets,

[Fred Bloggs]

I must admit to be struggling to see where a one man Ltd Co is caught by MSC regulations. This document sets out what an MSC is and I can't see how it fits a one man Ltd Co. If a one man Ltd Co is potentially caught then all the composite companies that turned into one man Ltd Co's were a waste of time.

[Taxless]

It all comes down to the unique circumstances applying in any given case.

In the following link under "What is a Managed Service Company (MSC)?", HMRC state it can apply to "both 'composites' and 'managed personal service companies'."

HM Revenue & Customs:Managed Service Companies

Your own company would almost certainly be regarded as a managed personal service company.

I am not saying that you are caught, as I don't know all of your circumstances, I am merely suggesting it might be worth considering and possibly speaking to your professional adviser.

[xoggoth]

At risk of repeating I am darn glad I retired before they started sticking this question in everything, so I don't have to waste time reading through their "clarifications" and trying to figure out what they are supposed to mean.

Actually, I am wondering if my other small business is worth the hastle given all the time one spends on jumping through their ever increasing hoops and coping with their ever crappier submission sofware. I don't know why anyone bothers to have a business at all. That's probably the intention, that we all end up working for the Stalinist state.

[SueEllen]

It all comes down to the unique circumstances applying in any given case.

In the following link under "What is a Managed Service Company (MSC)?", HMRC state it can apply to "both 'composites' and 'managed personal service companies'."

HM Revenue & Customs:Managed Service Companies

Your own company would almost certainly be regarded as a managed personal service company.

Where the definition of a "service company"? I can't find it on HMRC's site.

[Taxless]

I don't think there is a definition, it was one of the terms introduced by our old chum Gordon Brown when IR35 was born.

It is your (contractor) company that you control, supplying professional services to clients directly, or through an agency.

[SueEllen]

I don't think there is a definition, it was one of the terms introduced by our old chum Gordon Brown when IR35 was born.

It is your (contractor) company that you control, supplying professional services to clients directly, or through an agency.

Thanks I but I wanted the HMRC definition.