A PSC or Personal Service Company refers to a limited company that has been set up to offer the services provided by a single contractor. This person is the sole company director and shareholder of the business. In addition to that, Personal Service Company is also mentioned quite a bit in the rules of the government to determine the employment status of an individual. This is also called IR35. These rules help in making sure that workers are put in the correct classes as self-employed or employed so that they can make the correct payment for the employment tax.
It is also pertinent to mention here that in the business world, PSC has a different full form. It means Person of Significant Control. This refers to an individual who has the right to practice or exercise considerable influence over an enterprise or company. Please note that this is completely different from a Personal Service Company. However, the same abbreviations can sometimes lead to confusion.
Let us now check out everything there is to know about Personal Service Companies!
Why should you set up or establish a personal service company?
When you work in the capacity of a contractor, you might realise that some recruitment agencies and clients prefer working with limited companies instead of unincorporated sole traders. This mostly happens when it comes to contracting for companies in the financial sector and bigger organisations. There exist a few other reasons why a person might work through a limited company on contracts. This includes the scope of reducing the tax amount paid and limited liability or the separation of a business’s finances from the owner’s personal finances. If you are looking for advice on how to proceed further in this arena, get in touch with a good accountant company such as CloudCo Group.
Are there any tax implications?
Indeed, there are! When you work via a Personal Service Company, it might mean that you can pay less tax as the PSC shall get paid without any NI or tax taken. In addition to that, the PSC shall also pay Corporation Tax and other small business taxes (possibly) on all profits. Moreover, the PSC director has the right to pay himself/herself in a tax-efficient manner with a combination of dividends and salary. More often than not, this combination leads to higher take-home pay and lower tax bill for the director of the company as compared to sole trade or direct employment.
You must note that HMRC is not too keen on this particular state of affairs, especially in the case where they believe the contract between the PSC and the end client to be one of employment. Furthermore, HMRC has introduced IR35 and other off-payroll working norms that are intended to ensure that all workers who would have been employees if they were offering their services to the client directly pay the same National Insurance contributions and tax as employees.
If you are considering working via a Personal Service Company in the capacity of a contractor, make sure that you know all about IR35 and that any contracts that you take up have been reviewed professionally in case they fall inside the norms of IR35. This could potentially have a significant impact on how much NI and tax you must pay and also on how you get paid.
How can you set up a personal service company?
Starting a company is fairly easy, and you can set one up online in no time. However, when it comes to running one efficiently, it can stand you in good stead to employ the services of an accountant company that specialises in the industry of contracting. They will assist you in setting up your accounts online, managing your accounting and bookkeeping, helping with tax problems as well as ensuring you stay compliant. If you are a working professional and are just starting, consider getting in touch with an expert accountant company for small business as well as contractors!
As mentioned above, you can register a limited company by yourself now. However, it is better if you take the help of experts when considering setting up your very own limited company. DNS Accountants has experts in its team that can help you establish a limited company or a personal service company with ease. Our team of professionals are always at the top of their games and can make your life easy when it comes to an understanding of all the ins and outs of setting up a personal service company. Moreover, we can also help you understand how to minimise your tax liabilities as a professional. For more queries, concerns or questions, feel free to get in touch with us at +447739 339635