RTI Declarations – Service Company

And now round two of justify it

It’s time to run your first RTI PAYE year end and you have your own limited company, how do you answer this question?

Service Company ‘Yes’ if you are a service company – ‘service company’ includes a limited company, a limited liability partnership or a partnership (but not a sole trader) – and have operated the Intermediaries legislation (Chapter 8, Part 2, Income Tax (Earnings and Pensions) Act 2003 (ITEPA), sometimes known as IR35). Otherwise indicate ‘No’.

The question is now a bit more specific, which is great, because you will only answer ‘Yes’ if you have operated IR35.


HMRC IR35 Business Test expected to go live in April 2012

The Employment Status Test has been around for a few years now, see my recent Blog http://stevejbicknell.com/2012/01/28/so-you-think-you-are-self-employed-does-hmrc-agree/ but now IR35 is going to get special attention from HMRC.

What is IR35?
The Term “IR35” became established following a Budget press release issued by the Inland Revenue on 23rd September 1999. That press release was called “IR35”. At its simplest, IR35 is the way in which the taxman closed a loophole that was allowing many contractors and freelance professionals to avoid paying large amounts of Tax and National Insurance.

IR35 Forum

The latest IR35 Forum minutes show that a new trial IR35 business test will be made live on the HMRC website in April, together with a set of typical scenarios to help establish how likely a business is to be caught by IR35.

The minutes for the last two IR35 Forum meetings (21st February and 8th March) have been published on the HMRC site.

Out of an initial set of 17 IR35 scenarios examined by the Forum, the external members and HMRC agreed on 14 of them.

It was agreed that in order to avoid confusion, just 6 scenarios would be published online. Of these, two were ‘IR35 caught’ contracts, two were outside of IR35, one is a ‘grey’ case, and the final case begins outside IR35, but moves within the scope of the rules due to changes in the company’s practices.



Clarity on tax rules is always a good thing, but it will be interesting to see where the lines have been drawn.