Setting Up and Running a PSC
A limited company or Personal Service Company (PSC) is a legal entity, and it can act to generate revenue, get into debt, make profit, incur expenses and own property, amongst other things. A limited company is owned by its shareholders and run by its directors.
What is your psc?
A Personal Service Company (PSC) is a term first used by HMRC following the introduction of IR35 in April 2000. A PSC is seen to be a UK registered limited company, of which you (the contractor) are the director and sole shareholder. Sometimes, there’s a company secretary that manages the legal issues relating to the company. These people are all known as Company Officers. The day-to-day work is done by its employees.
Following the MSC (Managed Service Company) Legislation change in April 2007, the director is wholly responsible and in full control of the company’s business bank account. Through your psc, you are seen to be providing a service to agencies and clients.
Under HMRC guidelines through your psc, you will be seen as “self- employed”. By operating as “self-employed” you will be able to pay yourself a small salary and get most of your income payable to you in dividends. Dividends attract a much lower rate of Income Tax to higher rate tax bands and are not subject to National Insurance contributions’s.
When thinking of setting up your psc you need to be aware of the IR35 rule. IR35 stipulates that you must be deemed to be self-employed to operate through your limited company. IR35 can be a complete grey area, if you don’t know it inside out or if you don’t deal with someone who has excellent experience, you could land yourself a large tax bill. If you are deemed to be employed then your umbrella will be the right payment solution for you.
There’s a lot to think about, but the excitement of running your own business should make it all a bit easier for you. You’re not on your own and we will always be on hand to answer your questions, but we’ll help you with the basics now.
