Personal service companies—the key benefits and key tax considerations
Personal service companies—the key benefits and key tax considerations

The following Tax guidance note provides comprehensive and up to date legal information covering:

  • Personal service companies—the key benefits and key tax considerations
  • A typical PSC structure
  • The rationale for PSCs
  • Anti-avoidance provisions applying to PSCs—IR35
  • Criticism and uncertainty regarding IR35
  • PSCs and MSCs
  • PSCs, agency workers and onshore employment intermediaries
  • PSCs and offshore employment intermediaries
  • PSCs and the construction industry scheme (CIS)
  • PSCs and VAT
  • more

FORTHCOMING CHANGE: from 6 April 2020, the off-payroll IR35 regime currently applicable to public authorities will be extended to all medium and large private sector entities. For more detail on this extension, see Practice Note: IR35—off-payroll workers.

A worker can provide services in a number of different ways. The most common arrangement is an employment relationship, which means that the employer has to operate PAYE on the amounts paid to the employee, comply with real time information (RTI) obligations, pay employer National Insurance contributions (NICs), and comply with numerous employment law requirements. The employee receives his earnings net of income tax and employee NICs.

A significant minority work as self-employed individuals, either on their own or in partnership, supplying their services to clients. Such individuals are responsible for reporting and accounting for their own income tax and NICs liabilities. It is ultimately a question of fact in each case whether a worker is self-employed or not, see Practice Note: Establishing employment status.

A further type of arrangement is for the worker to provide services through an intermediary, such as a personal service company (PSC) or a partnership. There may be a number of commercial and other reasons for adopting such a structure. Subject to the application of the anti-avoidance legislation outlined in this Practice Note (and in more detail in the remaining