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Giuseppe Colombi
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Experienced Accountant and Tax Advisor for Small Businesses and Construction Companies
Experienced Accountant and Tax Advisor for Small Businesses and Construction Companies

83 followers
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What is a Service Company?

This is a question which is often asked by HMRC on many of their forms. It is a tricky question because a positive answer implies that the limited company is an intermediary, the sole purpose of which is to provide services to a client by the director of the company who, without the intermediary, would be an employee of that client.

There is no definition given by HMRC of what a service company actually is. However, every time HMRC refers to an intermediary they are likely to define the limited company as a service company.

The legislation covering intermediaries is known as IR35. Where IR35 applies most of the earnings the limited company receives, also known as the ‘Worker’s Attributable Earnings’, are subject to PAYE and NI.

Clearly then answering “Yes” to the question “Is your company a service company?” is likely to mean that some contracts at least may be subject to the IR35 legislation. We can provide a spreadsheet which is designed to work out the cost in terms of PAYE and National Insurance. 

If you believe that the contractual relationship your limited company has with a client is that of an employer-employee relationship you should consider very carefully how you answer the question “Is your company a service company?”  The answer is always yes.
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The UK construction sector is a vital contributor to the UK economy and a key driver of growth. Despite the challenges the sector has recently faced, construction continues to be one of the largest UK sectors and a key source of the UK’s gross domestic product and employment.

The Construction Industry is therefore vital to the UK economy, yet current tax legislation appears to be rather cumbersome and many contractors and sub-contractors have experienced difficulties with the administration of the current Construction Industry Scheme (CIS).

If you need help to ensure compliance with the system or are entitled to a tax rebate, please call our company on 020 8857 5781. In most cases we can organise a tax rebate where due in a few days.
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What qualities do you need to succeed as an Entrepreneur?
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How can you choose a good accountant?
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