RTI - Service Comnapy Question

[Contreras]

The 2013-14 RTI final submission for tax year (HMRC Basic PAYE Tools Software) asks:

Are you a service company that has operated the Intermediaries legislation (sometimes known as IR35) or the Managed Service Companies legislation? [Yes/No]

A service company who has operated the Intermediaries legislation (sometimes known as IR35).

A service company is one which is set up to supply a worker's services to a client. There is no contract between the worker and the client. The contractual arrangements are between the company and the client, either directly or via another intermediary. The company is usually under the control of the worker and it derives its income wholly or mainly from the supply of the worker's personal services.

For example: John Smith is a software engineer. John is a director and shareholder of his own company, John Smith Software Ltd.

Company A contracts with John Smith Software Ltd to use the personal services of John as a programmer. All payments are made by Company A to John Smith Software Ltd. In this example John Smith Software Ltd is a 'service company'.

So, is there a considered opinion on how to answer this for a typical "service company" contractor operating outside IR35?

The equivalent P35 2-part question used to be discussed/argued annually, PCG even had a news article with 'guidance' on it, but I can't find anything for the RTI question.

[The Spartan]

I'd really like to know what the deal is with this question too, as my accountant has advised me to put yes which I find disappointing as feel I'm paying for incorrect advice, plus they regularly post on this forum so I thought they'd have a better understanding of this PSC malarkey.

[The Spartan]

This may shed some light on it for you Contractors' Questions: How to answer P35's service company question? :: Contractor UK

[LisaContractorUmbrella]

I'd really like to know what the deal is with this question too, as my accountant has advised me to put yes which I find disappointing as feel I'm paying for incorrect advice, plus they regularly post on this forum so I thought they'd have a better understanding of this PSC malarkey.

Why do you think that advice is incorrect Spartan? I would have thought that most or all contractors would answer yes according to the parameters of the questions - most or all income would be derived from the services of the individual and the contractual arrangements would be as shown

[The Spartan]

Why do you think that advice is incorrect Spartan? I would have thought that most or all contractors would answer yes according to the parameters of the questions - most or all income would be derived from the services of the individual and the contractual arrangements would be as shown

It could be partly to do with the conflicting information I've read, I personally don't feel it is a personal service company based on the fact the services do not have to be supplied by myself. Plus I find it ominous that these questions have been introduced sure they can say they won't use the data but I don't believe this to be the case as it's quite easy extract once it's been entered onto a system.

[Clare@InTouch]

It could be partly to do with the conflicting information I've read, I personally don't feel it is a personal service company based on the fact the services do not have to be supplied by myself. Plus I find it ominous that these questions have been introduced sure they can say they won't use the data but I don't believe this to be the case as it's quite easy extract once it's been entered onto a system.

Regardless of whether the services have to be provided by yourself, they are. So that makes you a service company. I don't find that a concern though, as it applies to such a wide range of businesses that the information isn't a massive pointer - carpenters, accountants, electricians, mechanics, builders, solicitors, engineers. All could be service companies.

[LisaContractorUmbrella]

It could be partly to do with the conflicting information I've read, I personally don't feel it is a personal service company based on the fact the services do not have to be supplied by myself. Plus I find it ominous that these questions have been introduced sure they can say they won't use the data but I don't believe this to be the case as it's quite easy extract once it's been entered onto a system.

I have no doubt at all that they will use the data but, the fact is, that you do, I assume, provide the services yourself and therefore the correct answer would be yes - I think that the repercussions of answering no and then have HMRC come calling would be worse than if you said yes and then defended your IR35 position

[The Spartan]

Ok the questions states: Please answer Yes XXXXX Limited is a personal service company?
But the advice states : So if XXXXX Limited is a service business - and more than 50% of your turnover derives from services provided by partners or shareholders then you should answer "Yes

So in that respect Yes I am a service busines according to the advice.
Other than that if I submit the RTI with Yes to the question I have no choice on what I put on my SAR for the same similarly phrased question.

[Craig at Nixon Williams]

The service company question has changed for this year from a 2 part question to a single question. I have enquired with HMRC about how the new format question should be answered, and was told that it should only be answered 'Yes' if the company has operated the IR35 legislation.

If you are a PSC that operates outside IR35 then it should be 'No'.

Hope this helps!
Craig

[LisaContractorUmbrella]

The service company question has changed for this year from a 2 part question to a single question. I have enquired with HMRC about how the new format question should be answered, and was told that it should only be answered 'Yes' if the company has operated the IR35 legislation.

If you are a PSC that operates outside IR35 then it should be 'No'.

Hope this helps!
Craig

Are you talking about RTI submission Craig as the question quoted by the OP is for 2013/14 and seems pretty clear