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| P35 Forms - HMRC Issues Guidance on "Service Companies" |
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The 2007/08 P35 form contains a new question that asks "are you a service company?" This has caused widespread confusion, as the term "service company" is very broad and most companies provide some type of services. As a result HMRC has issued new guidance to clarify the issue.
HMRC has said a company, an LLP or partnership only qualifies as a "service company" if both of the following criteria apply:
An individual personally performs services for a client, and the services are provided not under a contract directly between the client and the worker, but under arrangements involving the service company. And:
The service company's business consists wholly or mainly of providing the services of individuals to clients.
If both of these criteria are met the form goes on to ask whether the intermediaries legislation (known as IR35) or the Managed Serviced Companies legislation have been applied. This is asking whether income has been treated as "deemed employment income" with PAYE and National Insurance deducted.
HMRC has stated it will not use the answers to these questions to launch an employer's compliance review. However at the very least this request for information, along with a similar question on the new Self-Assessment Tax Return, shows a renewed determination by HMRC to remind taxpayers of their responsibilities under IR35.
If you need any further advice on this issue please contact us on 0845 094 9470.
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