PSC Question on Self Assessment Tax Return

Firstly, a timely reminder that your Self Assessment return must be filed on or before 31st January (not that it’s likely that any of you would forget). You must also remember to pay any tax by 31st January to avoid interest being charged and definitely before 28th February, otherwise a 5% penalty will be levied on any unpaid tax at that date.

Secondly we’ll just provide our annual clarification of the ‘Service Companies’ question, which creates confusion every year.

The section should be completed if:

  • you performed your services (intellectual, manual or a mixture of both) for a client (or clients), and
  • 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, and
  • the company's income was, at any time during the tax year, derived wholly or mainly (i.e. more than half of it) from services performed by the shareholders personally. 

The majority of limited company contractors are, by definition, ‘personal service companies’ and therefore this box is of relevance.

The question however has no statutory backing and you cannot be penalised for failing or refusing to answer it but if contractors ignore the question when HMRC know full well that their company is a ‘service company’ then they may be drawing unnecessary attention to themselves.

The information to be entered is the total of the gross salary and dividends taken from the contractor’s company in the year ended 5th April 2012.

If you have any further queries please feel free to contact us.

By:Steven Bailey

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