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

The following Tax practice 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...

Coronavirus (COVID-19): in light of the coronavirus crisis, the government has announced temporary measures to support the employed. For more detail on this support for the employed, see Practice Note: Coronavirus Job Retention Scheme (original version to 30 June 2020) (CJRS). The CJRS is available to salaried individuals who are directors of their own personal service company.

FORTHCOMING CHANGE: from 6 April 2021, 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

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