Viewpoint: Can personal service companies save you tax?

[richy]

I searched, but could not find this being discussed - I had expected it would have! If I've missed it, could someone point me at the thread please.

The BBC published an article, with the arithmetic BBC News - Viewpoint: Can personal service companies save you tax? However, it doesn't seem to add up. I couldn't work out why though. Even if I pushed out all profit as divs in the same financial year, it would still work out cheaper because the lack of Employer+Employee NI contributions.. so why does the BBC think it is actually worse to be a freelancer?

Cheers, richy

[Jessica@WhiteFieldTax]

I'd need to pick it through with a spreadsheet - and as I have a life I'll pass on it - but I think Chas's article is wrong.

I think the key is:

This corrected version of this article was published on 8 October 2012. The original, published on 5 October 2012, contained an error, failing to reflect the availability of a 10% tax credit for people receiving dividends, which reduces the income tax bill for people using a PSC.

They've updated the figures so the article know shows a saving using a PSC, but not the conclusion. Par for the course, although he is the mouthpiece for the professional association I'm a member off, I don't think Chas is always on the ball.

I think there may be a error in the figures somewhere, in so far as with NIC removed I would expect the tax to be the same on PAYE v dividend, but it depends how allowances have been treated and so on. You'ld need to pick it though.

One important thing thats missed is the question of who gets the Ers NI benefit. Often it comes to the contractor not the engager. Then you've got to value paid holiday time, BIKs, and so on. The comparison has so many variables it can't be sound bited.

Of course, its political - the BBC have been given a drubbing over using PSCs in the newspapers, so they were trying to hit back here. In twitter terminology #fail