The use of a private limited company as a trading vehicle for consultants, known as a “Personal Service Company” (or PSC) has grown steadily in popularity over recent years. The contents of our website is written to give guidance our clients who have their own company or are thinking of operating though one; the content will be of general interest to many other business as well. Non clients are welcome to make use of the guidance, but should take advice from their accountant about its applicability to their circumstances.
Whitefield have over 30 years experience in the sector – long before IR35, and long before the proliferation of contractor accountancy and exotic – and normally failing – tax minimisation vehicles.
In March 1999 a budget press release entitled “IR35” heralded a major change in the attitude of the HMRC to personal service companies – previously the attitude had been benign, but from April 2000 new rules operate to restrict the flexibility and tax breaks of PSCs. These rules are still commonly known as IR35, after the press release. See IR35: resources on our site
Later an attack on family shareholdings in small companies under S660a (also known as the Settlements Legislation and by the test case, Arctic Systems), has been experienced by PSCs. This has now been in limbo for some years, but there is an outstanding commitment by the Government to resurrect it when the economy improves – see Income Shifting
In April 2007 legislation blocked the use by contractors of so called “Composite Companies” and “Managed Service Companies” – this legislation does not affect the services that we offer – see Managed Service Companies, Umbrellas and Composites
In April 2017 IR35 in Public Sector Contracts has been reformed significantly, with a promise to roll out these reforms to the Private Sector from 2020.
The content on our website is for guidance only, and personal advice should be sought on how circumstances apply to your own situation. No responsibility is accepted for action taken or not taken based solely on the contents of this guide.
Website content is copyright Whitefield Tax Limited, and may not be reproduced, including embedding in other websites or quoting elsewhere, without our express permission.
Within our website we refer to “Contractors” as a convenient description for individuals operating through PSCs. However this guide is applicable to anyone operating a small service company, and they may be described as “Freelancers”, “Temporary Workers”, “Consultants” or similar. Likewise although use of PSCs is prevalent in the IT and engineering sectors, this guide applies to any service activity provided through a limited company.
The content on our website is intended to be a practical guide, and is also tailored to our style of working. Because of this some legal and tax concepts have been simplified in their description so that their practical effect is clear – for example IR35 is referred to in this guide as creating a minimum salary level, which is its practical effect, however the strict position is that it creates a tax liability on a hypothetical minimum salary – more information on detailed technical matters is available on request.