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SA returns: Stalemate over service company question?

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24th Jun 2008
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The vexing issue of "the service company question" apparently remains unresolved, three months into the tax year.

Accountingweb.co.uk's readers flagged up the fact that guidance to the question on page TR4 of the 2008 SA tax return was far from clear, back in March. In the following month, the Institute of Chartered Accountants in England and Wales (ICAEW) and Chartered Institute of Taxation (CIOT) decided to seek clarification from HMRC as to the purpose for the question and as to which sorts of business are the intended targets.

The ICAEW said that "it is unhappy with the way that this question and accompanying guidance have been worded."

"This is proving more difficult to resolve than the similar question on this year’s Form P35 and on which we gave advice earlier in April, because the taxpayer is required to quantify the ‘Total amount of any income included anywhere on this Tax Return, derived from the provision of your services through a service company.’

It adds that it will be meeting with HMRC shortly and further guidance is expected.

Accountingweb.co.uk's tax editor, Nichola Ross Martin says: "This is the most idiotic state of affairs. In no way belittling the collective efforts of the ICAEW and CIOT to straighten this out for us, one has to ask: How many people does it take to change this particular light bulb?

I am sure that HMRC's new non-exec chairman, will have more than enough on his plate when he takes up his post, but I've got the feeling that someone with commercial background (i.e. time does equal cash) would have surely been able to find a work-around the fiasco in a matter of minutes."

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Replies (10)

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By User deleted
10th Jul 2008 10:52

.
Daft question, but are we are no closer to an answer/clarification on this?

What approach are others taking?

Jason
Holden Associates
A Blog for Small Business

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By User deleted
02nd Jul 2008 12:44

Illuminating!
Does this explain why I am having problems sourcing daylight bulbs at the moment too?

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dave tallett
By martintallett
30th Jun 2008 19:36

HMRC bans lightbulbs!
I didn't realise AccountingWeb was so influential!

http://news.bbc.co.uk/1/hi/magazine/7480958.stm

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By frauke
30th Jun 2008 15:28

No Stalemate - I got indirect Clarification!
I had this clarified by the HMRC internet system when it would only accept the SA return if the service company section was NOT Completed!

I thought I would bite the bullet a few weeks ago, and completed this section. Only to have it REJECTED - as this section had been completed!

So no implications for my clients for not completing this section of the SA returns!

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By mikewhit
26th Jun 2008 17:48

Pedantic point
(well, you know me !)

Stalemate in chess ends the game in a draw ...

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By MikeBellisimo
26th Jun 2008 09:59

Candles et al.
Candles! Arrrgghh

That's a clear vehicle for tax optimisation and I missed it!!!

I was of course trying to keep a simple picture and so I excluded the thorny issues of two people sharing the same lightbulb, two lower power lightbulbs being used to produce the equivalent of 60W whilst being taxed at the lower 30W rate.

I excluded the fact that single people really don't need 60W, should make do with 45W and so should be taxed accordingly.

There is also the problem of children. Some wily parents will donate the bulbs to their kids who are tax exempt and yet all will sit in the same room and benefit from the same light.

I won't even go into portable light-generting devices. It's already complicated.

There is also the problem of cats. They avoid the need for bulbs entirely by being able to work in low light conditions. Clearly they should all be rounded up and shot together with their owners who under ML regs must surely be culpable .

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By User deleted
26th Jun 2008 08:50

Rebecca
I sincerely hope that you have a scheme reference number in hand. You must have met at least 4 hallmarks with that little ruse!

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Rebecca Benneyworth profile image
By Rebecca Benneyworth
25th Jun 2008 17:28

Can I interest you in..
a new product?

It emits, light, but is not a lightbulb. It uses a modified form of fire, which does not meet the technical definition of "fire" as such, and my new product is easily portable and does not even need an electricity supply.

These are available in limited numbers, and will therefore command a high price, enabling purchasers to avoid both lightbulb tax and fire permits.

If you are interested, I shall require you to sign a confidentiality clause not to reveal how candles work, or where they can be bought.

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By mikewhit
25th Jun 2008 17:11

Not only
You have forgotten to mention that if you and your wife both use a 30W bulb, you are taxed as if you are using 60W since your wife is not really using the light.

Also if you are using a Managed Lighting Service from your accountant, or Barry Robulb, you have to pay so much tax it's not worth it.

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By MikeBellisimo
25th Jun 2008 11:36

Lightbulb definitions
I think it's an issue with definitions.

Once upon a time lightbulbs were simple - a 60W bulb was self explanatory and so they were taxed on the basis of 60W.

Then someone came along and invented low-energy bulbs that had an actual power consumption of 11W and a nominal light output of 60W and an actual light output closer to 45W.

"Hold on" says the taxman. "People using lower energy bulbs are avoiding tax and we are losing out. So we will declare that low energy bulbs have a deemed taxable output of 60W and we will claim tax on the deemed wattage".

That went well for a while even though taxpayers kicked up a fuss.

Then someone noticed Fire. Fire also emitted light.

The taxman thought "People might use the light from fire to avoid paying our bulb tax. We need to monitor this situation" - and so Fire Permits were born.

The next year after the permit was born the taxman decided that every fire that had a permit had a nominal light output of 10W and started issuing tax demands accordingly. At the same time taxpayers could opt for a variable rate tax by submitting a timelog of actual light-output from the fire.

Taxpayers became upset.

Some wily taxpayers worked out that since lightbulbs also emit heat they really should have a taxable deduction made for the heat output since fires are not taxable. They won that concession and lightbulb tax takes fell.

Finally the taxman threw up his hands and said "It's all a bit more complicated than we thought".

Of course, this is clearly fantasy, such a thing would never be admitted.

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