Personal Service Company (PSC) guide
Are you thinking of setting up a Personal Services Company (PSC) as your limited company? What is it? A PSC is a corporate vehicle a limited company that contractors use to contract through. It has to be incorporated and registered at companies house and will need an independent accountant and a director (usually the contractor if operating as a PSC), Insurance to operate, a business bank account and if trading at sufficient levels registration for VAT.There are some fantastic benefits to contracting through a limited company BUT they come with important legal responsibilities and you need to be working outside of IR35 to enjoy them so be careful!
As a middle range committed contractor (earning more then £250 per day) you may wish to contract through a Limited company known as a Personal Service Company or PSC. BITE offer PSC Limited Companies through a firm of qualified accountants. If you wish to contract through BITE and have your own Ltd Company ( PSC ) we recommend you appoint a qualified accountant to set up and advise you on administering your PSC.
Case Law and poor contracts could make PSC’s less attractive
The Dragonfly contracting case has up held the HMRC argument that the right of substitution in a contract will only take a contractor outside of IR35 (yielding significant tax and expense benefits) if it is genuine. Contractors should therefore always check the end client–agency contract to see if it limits the right of substitution. Without sight of this contract you (the contractor) are risking your tax status if operating via a PSC (Personal Service Company).
The latest HMRC business entity tests outline how HMRC staff will generally assess the probability of a contractors contract being outside of IR35 and the need to earn more than 20 points against this test becomes very important to feel secure in your contracts.
Top Tip: Check with BITE use our Contract Administration service, contract log and mobile job seeker portal for contractors. Only use a PSC if you’ve checked your company contract status can earn more than 20 points under the HMRC business entity test and if you can have sight knowledge of the end client contract! Will the agent even let you see this? Don’t get caught in the middle without support.
Important Legislation changes the way PSC’s operate
BITE encourages contractors to contract via its temporary PAYE Umbrella or Consultants employment contracts but recognises that you may wish to supply your services to BITE via your own limited company (PSC) or the relocation opportunity of the TLC.
However BITE offers these few simple guidelines to help ensure you contract legally.
There are opportunities to increase your net income between 15-20% (on average) over most PAYE schemes but these will be dependant on being OUTSIDE IR35 AND NOT BEING CAUGHT BY THE MANAGED SERVICE COMPANY LEGISLATION EFFECTIVE APRIL 2007. In addition the AWR 2011 will encourage agencies to push some contractors to work through Limited companies and this may not always be the best solution.
IR35 determines whether according to your contract and working conditions whether you are employed paying full tax and national insurance or a true freelancer where you can pay yourself via dividends.
MSC Legislation dictates that PSC’S may only be set up via independent Qualified / Chartered Accountants and that organisations offering tax saving advice for contractors may well be MSC, therefore PSC’s receiving such advice in turn become MSC’s and liable TO PAY FULL TAX AND NATIONAL INSURANCE on all income (we do not set up your company for you or offer you tax advice).
AWR ( Agency worker Regulations ) October 2011 are resulting in disliked administrative burdens on agencies and opted out limited company contractors are theoretically except meaning some agencies may prefer Limited company contractors. However unless the contractor is outside IR35 there is no benefit to them and indeed there may be increased costs. The PAYE alternative using the Swedish Derogation might be a better alternative.
BITE recommends that you therefore contact a legally recognised firm of qualified accountants to form your PSC and that they should be experienced in providing services to the IT & Accountancy Industry.
BITE will work with contractors providing there own PSC but will only accept those companies provided through “bonafide” qualified / chartered accountancy firms.
- Potential tax savings (UP TO 20%) if a legitimate freelancer contracted outside of IR35
- Opportunities to claim legitimate business related expenses
- Structuring the company to suit your business needs
- Opportunity to retain funds within the company
BITE OFFER CAREER ADVICE so that you can make the right decision for your personal circumstances and backs this up with the opportunity of qualified independent accountancy, financial and legal advice on your contract, employment, financial, pension and visa services. BITE provides PAYE Supply & Limited company supplier services, all PSCs must be incorporated via a firm of qualified / chartered accountants.
No Job no fee guarantee disclaimer: Under the 10 step job search program, we can’t help you get a job unless you regularly visit our offices, attend training sessions and utilise the support provided to you. We work face to face with real people and you must work with us to help you. If then you don’t gain a job in the agreed time having attended the whole 10 step career coaching programme and used our job search database correctly we won’t charge you a penny!
The Three Day Marketing Personal Brand Plan does not carry a no job no fee guarantee.
However If you purchase one of our training modules separately, attend and are not satisfied with it we will refund your money.
BITE Consulting covers: IT Contracting London UK, IT Consulting London UK, IT Contract work London, IT contract Jobs London, Temporary IT work in London, Temporary IT Jobs in London, working with Freelance Interim Consultants for professional jobs.
BITE also offers: Contractor marketing and advertising services, CV Marketing services, with how to write an IT Contract CV to produce a Killer contract CV with, IT CV templates and IT CV examples. Your Jobsearch in our London office provides access to the hidden contract job market, career coaching for contractors, and contractor career management services .
BITE is not a visa or employment agency.