Personal Service Company

How does HMRC Define a ‘Personal Service Company’?

06/12/2021Business , Limited Company , Sole Trader

Sometimes the contractor set a company to provide their services to the clients that are known as PSC (Personal Services Company). This has been observed that agencies and clients prefer personal service companies over sole traders or people who work individually. The reason behind this could be the one that comes in between while you are hiring a sole trader, the relation is still considered as employer and employee, not contractor and client. This way the client is responsible for sick pay and other holidays. By now you must be wondering what is a personal service company?

Before we delve into further discussion, let’s have a look at the points of discussion in this article, this includes the following:


What is a Personal Service Company


  • What is a Personal Service Company and why to Set up?
  • Client Benefits
  • The Bottom Line


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What is a Personal Service Company and why to Set up?

As discussed earlier a personal service company is set up by a contractor to provide their services to the clients. The question that arises here is that why do contractors set up the PSC? This is because it seems the best option out of all the options to get the work in the fastest way possible. If the contractors want a quick response at work, setting up a personal service company is the best way to get it.

Out of several benefits that the contractors get from the PSC, the most prominent happens to be tax efficacy. A fusion of salary and dividends goes to the contractors as their income. This makes them avoid paying the employee-employer national insurance and other such deductions as well. This can make a big chunk of take-home pay come home without a lot of deductions.


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Client Benefits:

Often people dream to manage work in a way in which there are chances to avoid the relationship of employee and the employer. There are many more benefits for the client that come with the offer, this includes the following:

  • Reduced risk of getting to hire an organisation but a single person who is considered as a company as well.
  • The option of seeing the contractor in case things don’t go as planned makes the clients feel safer.
  • For a better protection factor, the hiring process may include the agency before giving the authorisation.
  • This can further work like a one-stop-shop in which there is a search of the need-based skilled contractors for the business projects.


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The Bottom Line:

Now that you have developed a better understanding of What is a Personal Service Company, we can sum up the discussion by saying that a number of client benefits come with the offers made by the contractors who work as a PSC. However, if to ensure the seamless working of the process, professional help can help you decide what is the most beneficial and suitable option for you as a client.

We hope this basic guide developed a better understanding of personal service companies and relevant details.


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Disclaimer: This article intends to provide general information based on What is a Personal Service Company.

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