What are the implications of being a Service Company? Q1 Page TR4 SA100 Reply


 

Tax Money

Here is the question:

If you provided your services through a service company (a company which provides your personal services to third
parties), enter the total of the dividends (including the tax credit) and salary (before tax was taken off) you withdrew
from the company in the tax year – read page TRG 21 of the guide
£ • 0 0

This is what the guide says:

Service companies
Box 1 If you provided your services through a service company

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 both) 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/worksheets/sa150.pdf

The majority of limited company contractors are, by definition, ‘personal service companies’ and therefore this box is of relevance.

The question however has no statutory backing and you cannot be penalised for failing or refusing to answer it but if contractors ignore the question when HMRC know full well that their company is a ‘service company’ then they may be drawing unnecessary attention to themselves.

The information to be entered is the total of the gross salary and dividends taken from the contractor’s company in the year ended 5th April 2012.

http://shop.qdosconsulting.com/freelancer/news/2013/01/18/psc-question-on-sa-return

The point is not the whether you answer the question or not, its whether your company falls under IR35 that matters most.

IR35 came into existance in 1999,  it was created to prevent workers previously employed from creating a limited company and then benefiting from lower taxes and national insurance through the use of dividends and expenses.

So you think you are self employed, does HMRC agree?

https://stevejbicknell.com/2012/01/28/so-you-think-you-are-self-employed-does-hmrc-agree/

Can your business pass the HMRC IR35 Business Entity Tests

https://stevejbicknell.com/2012/05/14/can-your-business-pass-the-hmrc-ir35-business-entity-tests/

Consultants beware of IR35

https://stevejbicknell.com/2011/09/10/consultants-beware-of-ir35-use-the-qdos-model-contract-free/

steve@bicknells.net

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