Are you a service company question?

[psychocandy]

Interesting article here :-

Are You a Service Company? - Contractor Weekly

[scooby]

good comment posted below the article:

The 'normal' case is that the contract is between the 'service company' and an agency. The services are performed for a third-party 'client'.

No should be ticked because there is no contract between the service company and the client.

Alternatively, if the agency is deemed to be the 'client' then No should be ticked because the services are not performed for the 'client' but the 'end user'

It does seem that contracting is being squeezed and targeted heavily, more so than previous. 12-18mths and may jump to perm and not come back...

[Clare@InTouch]

If you're a director and shareholder of a limited company, providing your personal service, then you're a service company. I don't think it's anything to be concerned about as it catches people like plumbers, accountants, carpenters etc too, so hardly narrows down HMRC's target list by much. Plus, if you've answered yes in a prior year and suddenly change to no, that's going to raise your profile more.

You also need to make sure your answer on the P35 matches the data on your tax return.

The HMRC guidance is quite clear.....

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

[scooby]

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;

Clare, I get the rest, but as per comment above, when contracted to agency, it's not direct with a customer... Is the agency the client even though you are delivering the work to them?

[Clare@InTouch]

Clare, I get the rest, but as per comment above, when contracted to agency, it's not direct with a customer... Is the agency the client even though you are delivering the work to them?

Arguably yes - you're still providing your services to the agency, it's just that the agency then pimps you out to a client.

Or, ignore the agency and look at the substance of the relationship and you're providing your services to the client, the agency is just an admin system in the middle.

The viewpoint that you don't work for the client as you work for the agency is no different than trying to argue IR35 doesn't apply as you work for the agency. I can't see how it would stand up. And I don't think it raises a massive amount of risk either - imagine how many companies in the UK answer yes to that question!

Some slightly old advice from the PCG here:

In our experience, most freelancers operating via their own limited companies will tick yes to the first part, as the shareholders are usually also the main fee earners of the business. We would stress that answering yes to the first part of the question is NOT an admission that you are providing personal service on a particular engagement. Turning to the second part of the question, this is very straightforward. If the member believes his/her engagements are not caught by IR35 and is not operating an MSC, then the answer here will be "No".

Service company questions on the P35 and tax return | PCG

[psychocandy]

Of course, another viewpoint is that if you put no or try to play funny buggers then this also flags to HMRC.

[northernladuk]

Of course, another viewpoint is that if you put no or try to play funny buggers then this also flags to HMRC.

Really? How is that? Do they have a 'funny buggers' logic that flags it to HMRC or does every no picked trigger an alarm. Surely this falls in to your no one will check catagory as your last post. Picking no is an acceptable answer for some situations so can't see why it would be 'flagged'.

[TestMangler]

Arguably <snip>

And there is the problem, right there...........

[Clare@InTouch]

And there is the problem, right there...........

Not really, as it was followed by pointing out that if that bit didn't apply, then the second sentence did. Either way you look at it, you're a service company if you meet the HMRC definition regardless of whether it's the Agent who's seen as your client or the End Client themselves.

[psychocandy]

Really? How is that? Do they have a 'funny buggers' logic that flags it to HMRC or does every no picked trigger an alarm. Surely this falls in to your no one will check catagory as your last post. Picking no is an acceptable answer for some situations so can't see why it would be 'flagged'.

Not me mate - did you read the article?

Are You a Service Company? - Contractor Weekly