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A little while ago we commented on Service Companies and the P35 question – the issue has come up again, this time in the HMRC led IR35 forum minutes.

The answer is in the context of the introduction of PAYE Real Time Information, a forthcoming initiative that will see employers large and small sending payroll information monthly to HMRC rather than annually.  Having previously admitted that the questions, currently two part, lacked statutory backing, from 2013-14 the questions will be statute backed and compulsory.

As always the devil is in the detail.  The current non statutory questions – which HMRC ask but you can’t be penalised for not answering are:

Are you a Service Company? – No Yes

If ‘Yes’, have you operated the Intermediaries

legislation (sometimes known as IR35) or the

Managed Service Companies legislation? – No Yes

The new question will apparently be:

Are you a service company who has operated the Intermediaries legislation (sometimes known as IR35) or the Managed Service Companies legislation?

A lot rests on the words!  Previously you had to answer were you a “Service Company” or not, and you would have struggled to find any legal definition to reference that question to – cynically some may say the vagueness suited HMRC as a “yes” was a alert that the legislation may apply.  Now it will just be a simple declaration as to whether IR35 or the MSC legislation has applied.

Personally I see this as progress.

^JH