Service Companies question in 2011 Personal Tax Assessment

[ratewhore]

Thanks I but I wanted the HMRC definition.

Phone them up and ask them. If you get an answer, can you post it here?

[Clare@InTouch]

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

According to HMRC:

Service companies
Complete this box if you provided your services through a service company. You provided your services through a service company if:

• you performed services (intellectual, manual or a mixture of the two) for a client (or clients); and
• the services were provided under a contract between the client(s) and a company of which you were, at any time during the tax year, a shareholder; and
• the company’s income was, at any time during the tax year, derived wholly or mainly (that is, more than half of it) from services performed by the shareholders personally

Do not complete this box if all the income you derived from the company was employment income.

http://www.hmrc.gov.uk/sa/service-co...s-question.htm

[Taxless]

Sorry SueEllen, but they don't seem to have one.

I have access to Lexis Nexis/Simon's Taxes in electronic format and a search of these very comprehensive products has failed to show anything.

I think all one-(wo)man companies would be regarded as personal service companies as they supply the director/contractor personal professional services through the medium of that company.

[Fred Bloggs]

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.

Sorry to labour this point but the very next line down in that document says-

In essence a scheme provider promotes the use of these companies and provides the structure to workers. The worker (although a shareholder) does not exercise control over the company.

I do not have a "scheme provider".

[Taxless]

Sorry to labour this point but the very next line down in that document says-



I do not have a "scheme provider".

As I say, we do not have all of the information but any service providing company paying workers for their efforts in relation to services performed by way of dividends could be caught by the rules, but only if the MSC provider were involved with the company.

The content of the legislative definition of a managed service company provider is “a person who carries on a business of promoting or facilitating the use of companies to provide the services of individuals”.

Depending on exactly what advice was delivered when you set up your company, HMRC might interpret that adviser as being the "scheme provider".

I suspect that this will be fairly unlikely, but not impossible, and can only be determined on the basis of the facts unique to each case.

Generally I feel the legislation was designed to catch a different type of fish but UK tax legislation is often so badly drawn that it ends up catching those it was never intended for.

With an HMRC desperate to raise money I just worry about where they will turn next for some cash.

All that said, I would be very surprised if the facts in this case would be sufficient to fall within the MSC legislation.

[xoggoth]

I am not surprised the last commenter is confused by that line.

When did "Personal service companies" become a subset of Managed service companies? Doubtless if I had to (or could be *rsed) I would find "Managed personal service companies" is Clause 4 subsection A (iii) (2003)of "Managed service companies"

I was trying to check if an amount owed to me for online filing was actually due for years I paid no tax/NI and on one bit of their page it said it does not depend on remittances having been made and further down that it is not due if a nil return is made.

What is it with these twits that they can never make anything clear?

[Fred Bloggs]

Thanks, I think you're right, it seems HMRC are going to have a stab at applying this legislation in a way that was neveer intended originally. The MSC legislation was aimed fair and square at closing down composite companies, nothing else, AFAIK. It has been successful in that aim but the MSC legislation spawned many 000's of one man Ltd Co's giving HMRC an even bigger head ache than they had with the pretty small number of MSC providers. When my company was formed terms like "MSC", "personal service company" had not been dreamt up.

[SueEllen]

Sorry SueEllen, but they don't seem to have one.

I have access to Lexis Nexis/Simon's Taxes in electronic format and a search of these very comprehensive products has failed to show anything.

That's what I suspected.

A mate of mine is considering setting up a limited and as she is a pedant* I was just confirming that there was no definition provided by HMRC.

*There is a good reason for this.

[LisaContractorUmbrella]

I don't think that a single person Ltd Co. can possibly be caught under the MSC legislation, even with the new definitions, simply because I cannot see how you would ever be termed an 'intermediary' - you will be personally supplying your services direct to the client. I think that HMR&C have expanded the scope of the legislation so that they can cover all the little rascals who have consulted 'leading QC's' in order that they can promise '90% take home pay'; there are many different types of schemes that have been set up and it would be impossible to legislate against all of them but the MSC legislation is all encompassing and has the added bonus of debt transfer which would usually be enough to make agencies run a mile.

[THEPUMA]

I don't think that a single person Ltd Co. can possibly be caught under the MSC legislation, even with the new definitions, simply because I cannot see how you would ever be termed an 'intermediary' - you will be personally supplying your services direct to the client. I think that HMR&C have expanded the scope of the legislation so that they can cover all the little rascals who have consulted 'leading QC's' in order that they can promise '90% take home pay'; there are many different types of schemes that have been set up and it would be impossible to legislate against all of them but the MSC legislation is all encompassing and has the added bonus of debt transfer which would usually be enough to make agencies run a mile.

I can guarantee you that HMRC are currently investigating several single person ltd companies under the MSC legislation and I think it is likely that some unrepresented taxpayers will already have paid up.

What do you mean when you refer to an intermediary? In the MSC legislation, there are references to MSC providers (the accountant in laymen's terms) and MSCs but I don't recall any reference to an intermediary.