Service Company question for 2014-15 tax return

[2BA]

The only advice I can find relates to the 13-14 tax return & says to say no to being a service company, but I can't find anything for this year & from HMRC's wording, it sounds like I should:

Service company income

Complete this field if you provided your services through a service company.

You provided your services through a service company if the following apply:
• you performed services (intellectual, manual or a mixture of both) for a client (or clients)
• 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
• 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 field if all the income you derived from the company was employment income.


Surely this description means that any contractors & even builders would have to describe themselves as a service company right?

Thanks

[TheCyclingProgrammer]

A common sense interpretation of the question would lead you to believe that yes, most Ltd company contractors would answer YES to this question and I have always completed it this way.

There are those who believe that HMRC has no right to ask for this information, that a "service company" has no legal definition and they therefore choose not to answer it. Accountants seem to have mixed opinions on it too.

Yes, a builder who operated as a Ltd company and performed most of the jobs personally would probably answer yes to this too.

[cojak]

Think 'DOTAS', think target pinned to your forehead....

[BolshieBastard]

A common sense interpretation of the question would lead you to believe that yes, most Ltd company contractors would answer YES to this question and I have always completed it this way.

There are those who believe that HMRC has no right to ask for this information, that a "service company" has no legal definition and they therefore choose not to answer it. Accountants seem to have mixed opinions on it too.

Yes, a builder who operated as a Ltd company and performed most of the jobs personally would probably answer yes to this too.

My accountant's advice based on legal representation is not to answer the question. Never had an issue from HMRC in the past with them not answering it either.

Im not sure if HMRC have got wise and now state its a mandatory question so would need to quiz them when i go in soon.

[TheCyclingProgrammer]

My accountant's advice based on legal representation is not to answer the question. Never had an issue from HMRC in the past with them not answering it either.

Im not sure if HMRC have got wise and now state its a mandatory question so would need to quiz them when i go in soon.

I've not actually asked my accountant his view, I've always just completed it. I thought you had to answer one way or the other and I couldn't honestly answer no IMO.

Nixon Williams seems to think it should be answered:
Self Assessment Service Company Question Help | Nixon Williams

Worth mentioning that this may be different to the payroll final RTI submission question which I believe should only be answered with a yes if you were IR35 caught.

[BolshieBastard]

I've not actually asked my accountant his view, I've always just completed it. I thought you had to answer one way or the other and I couldn't honestly answer no IMO.

Nixon Williams seems to think it should be answered:
Self Assessment Service Company Question Help | Nixon Williams

Worth mentioning that this may be different to the payroll final RTI submission question which I believe should only be answered with a yes if you were IR35 caught.

Nah, you didnt have to answer it in previous years. As I said, I dont know if HMRC have now made it a mandatory question. I need to ask them.

Had no come back from HMRC for previous years where no answer had been provided before.

[jamesbrown]

I don't believe it's a statutory requirement, but most of the well-known contractor accountants (AFAIK) recommend that it's answered. FWIW, the same information is available elsewhere in the return, and as indicated here:

27. HMRC confirmed that the service company question on the ITSA Return is used as part of its wider risk assessment process. It was acknowledged that in many cases the question is left blank which itself can be risk profiled against other entries on the return which would tend to indicate that the question should have been answered. The question is only one factor in HMRC’s wider risk profiling.

In other words, it's pretty irrelevant but, if it's answered at all, it should be answered truthfully.

[VectraMan]

In other words, it's pretty irrelevant but, if it's answered at all, it should be answered truthfully.

I would err on the side of not lying to HMRC.

If you're confident in your IR35 status it shouldn't make any difference anyway.

[Maslins]

FWIW we don't complete it for the majority of our clients. No tax at stake, so not worth the effort IMHO. Don't see how HMRC could penalise you for something that lead to no underpayment of tax.