Personal service company

In this lesson

1. 0:00 Personal service companies explained
2. 0:23 How PSCs work and structure
3. 1:46 Advantages for workers and clients
4. 3:05 IR35 rules and relevant engagements
5. 4:06 Notional salary and tax treatment

About this lesson

critical conditions that trigger IR35 treatment. You'll understand when HMRC treats a personal service company as employment income instead, and how the notional salary rules work to prevent tax avoidance through this structure. Personal service companies can be attractive because workers pay corporation tax rather than income tax, can claim business expenses, and can extract profits flexibly through salary and dividends. However, if you own 5% or more of the company and your contract with a small client would be considered employment without the company structure, HMRC will deem it a relevant engagement. When IR35 rules apply, the income is treated as notional salary, triggering both income tax and National Insurance as if you were an employee—though any dividends paid from this income won't be taxed again in your hands. This concept is essential for the Taxation (TX) paper, particularly when advising clients on business structure and personal tax planning. Understanding when personal service companies work and when IR35 restrictions apply will help you give confident, compliant advice on this popular but heavily regulated arrangement.

Duration: 5m