Personal Service Companies in the Public Sector

The rules on using Personal Service Companies (PSCs) in the public sector are set to undergo a radical overhaul in 2017 as the Treasury has viewed use of a PSC as a tax avoidance strategy for some time.

The responsibility for deciding whether the intermediaries’ legislation applies will move from the person working through a PSC to the public sector organization (PSO) employing the individual.

Under the new rules, public sector organisations will have to ensure the correct tax is remitted to HM Revenue & Customs (HMRC) in respect of the work for which they pay.

The change won’t stop people who have established their own PSCs from receiving payment through the company – but it will end any tax advantages currently available.

HM Revenue & Customs (HMRC) has said that PSOs will receive clear and objective tests – underpinned by a simple digital tool – that will enable them to determine whether engagements they make are affected by the PSC rules.

The danger is that genuine businesses that would not be subject to the PSC changes will have to navigate through time-consuming administrative tests before they can carry out vital public sector work.

If the new policy is not implemented smoothly, the consequent burden could fall particularly heavily on the construction sector where PSC use is commonplace, causing difficulties in an already beleaguered sector.

Milsted Langdon can advise all individuals – and businesses – incorporated as Public Service Companies about the new regulations. We can also ensure their work in the public sector can be undertaken with minimum inconvenience after the new regime is in place.

For more information, please contact us.

Posted in News.