PSCs, IR35, MSCs and employment intermediaries

A worker can provide services in a number of different ways:

•
as an employee
•
as a self-employed person, or
•
through an intermediary, including a personal service company (PSC), a managed service company (MSC) or an employment intermediary (such as an umbrella company or an employment agency)

There may be a number of commercial (and other) reasons for adopting the use of a PSC, MSC or other employment intermediary. However, any expected tax or National Insurance contributions (NICs) advantages should be carefully considered in light of substantial anti-avoidance legislation.

PSCs

A typical PSC structure is set out in Practice Note: Personal service companies—the key benefits and key tax considerations. This structure could, without the application of the anti-avoidance legislation (more generally known as IR35), result in income tax and NICs savings (for both the worker and the client/engager) as against the amounts that would be due if there were an employment relationship between the worker and the client/engager.

If, however, the IR35 legislation applies, those advantages are lost as a 'deemed' employment relationship between the worker and the client/engager is created.

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