5. PERSONAL SERVICE COMPANIES
[ch 5: page 30]What is a personal service company?
A personal service company (PSC) is a limited company with one shareholder/director providing services to clients or end users through that company. The PSC contracts with clients, either directly or through an agency, to supply its director’s services. The individual behind the PSC never contracts directly with the client.
The PSC invoices the end user for the services it provides. The end user pays neither National Insurance nor PAYE tax and has no employment liabilities to the individual behind the PSC. The PSC typically pays a wage to its sole employee, which for tax reasons is often limited to the annual tax-free personal allowance (£10,000 in 2014-15). The rest of the PSC’s revenue is paid as dividends to its only shareholder.