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HMRC have published new guidance on the service companies question on page TR4 of the 2007-08 self assessment (SA) tax return for individuals.
The launch of the revised wording - which applies to both the current year and future years - follows lengthy discussions between the Revenue and two professional bodies: the Chartered Institute of Taxation (CIOT) and the ICAEW Tax Faculty.
As a result of that collaboration, HMRC has now been developed:
- Clearer guidance in the tax return guide, which should be read when completing the 2007-08 SA tax return, and returns for future years.
- Revised wording for the service company question, which will first appear on the 2008-09 SA return.
In addition, the CIOT and ICAEW worked together to produce additional notes for members, in the form of questions and answers.
The members' guidance, together with the HMRC revised guidance, explains and amplifies what is meant by 'service company' and explains when a taxpayer can ignore the box.
It confirms that a person need only enter the total of dividends including the tax credit plus gross salary, but not other benefits, in the box. It further confirms that no additional record keeping is required.
HMRC said: 'We acknowledge that, with hindsight, the question on the tax return and [the] original guidance were unclear, for which we apologise'.
