Reply to: What defines a PSC?

[Greg@CapitalCity]

In fairness there's no real professional consensus about whether you should complete it or not. Some accountants say yes, others say as its not part of the tax calculation it's basis is dubious at law, so ignore it. I'm t aware of anyone being penalised or criticised for not completing it, and I would struggle to see how HMRC would do so.

Yep, I agree. I think complete your personal tax return with care, and if by mistake you leave the Service Company section of your tax return blank, well it doesn't result in any loss of tax anyway meaning tax-geared penalties cannot apply. For our clients, we complete the Service Company section of the personal tax return.

[Jessica@WhiteFieldTax]

So most of us here using our own LtdCo should complete the Service companies section of our personal tax return as we get most of our money from providing services?

The reason I ask is that I have mine in front of me at the moment and my accountant hasn't filled it in. I have sent him an e-mail asking for clarification before signing it off.

In fairness there's no real professional consensus about whether you should complete it or not. Some accountants say yes, others say as its not part of the tax calculation it's basis is dubious at law, so ignore it. I'm t aware of anyone being penalised or criticised for not completing it, and I would struggle to see how HMRC would do so.

It's an example of unthoughtout form structure.

In other words don't loose too much sleep either way.

[Acme Thunderer]

The term 'service company' crops up in two places;
(a) Your personal tax return - Page TRG21 (where on earth did they get their page numbering system from) of SA150 spells this out for you. Or just read the paragraph that Contreras provided - its the same thing. To be fair, when you read about PSC's in the press, they will most likely be honing in on this (along with their wildly inaccurate statements on tax savings). This question is restricted only to people who use a ltd company, and if you want definitions this is the best one you'll find;

So most of us here using our own LtdCo should complete the Service companies section of our personal tax return as we get most of our money from providing services?

The reason I ask is that I have mine in front of me at the moment and my accountant hasn't filled it in. I have sent him an e-mail asking for clarification before signing it off.

[Jessica@WhiteFieldTax]

The term 'service company' crops up in two places;
(a) Your personal tax return - Page TRG21 (where on earth did they get their page numbering system from) of SA150 spells this out for you. Or just read the paragraph that Contreras provided - its the same thing. To be fair, when you read about PSC's in the press, they will most likely be honing in on this (along with their wildly inaccurate statements on tax savings). This question is restricted only to people who use a ltd company, and if you want definitions this is the best one you'll find;

(b) Your company PAYE return - where you get asked 'Are you a service company'? This is not just for companies, but also partnerships (not sole traders) and limited liability partnerships. Here, the employer has to decide whether their business provides services rather than goods to clients, and if so, whether more than 50% of its income is derived from services provided in person by the partners or shareholders. The answer to to this question depends on the fee earning capabilities of partners and shareholders, but as you can imagine, if there are only one or two partners then the answer is most likely yes. And think about all small accountancy firms, solicitors, IT firms, consultants, BBC presenters....that is a HUGE number of service companies. Which kind of makes the whole question a bit irrelevant.

^ sage advice

[Greg@CapitalCity]

So if you ran a 1-man Ltd buying and selling on eBay, you're technically a PSC?

The term 'service company' crops up in two places;
(a) Your personal tax return - Page TRG21 (where on earth did they get their page numbering system from) of SA150 spells this out for you. Or just read the paragraph that Contreras provided - its the same thing. To be fair, when you read about PSC's in the press, they will most likely be honing in on this (along with their wildly inaccurate statements on tax savings). This question is restricted only to people who use a ltd company, and if you want definitions this is the best one you'll find;

(b) Your company PAYE return - where you get asked 'Are you a service company'? This is not just for companies, but also partnerships (not sole traders) and limited liability partnerships. Here, the employer has to decide whether their business provides services rather than goods to clients, and if so, whether more than 50% of its income is derived from services provided in person by the partners or shareholders. The answer to to this question depends on the fee earning capabilities of partners and shareholders, but as you can imagine, if there are only one or two partners then the answer is most likely yes. And think about all small accountancy firms, solicitors, IT firms, consultants, BBC presenters....that is a HUGE number of service companies. Which kind of makes the whole question a bit irrelevant.

[Contreras]

But the definition you gave is the same as a closed company.

No that's a different animal. For starters, a "close company" does not necessarily earn its income from services, let alone services performed by the shareholders.

[SueEllen]

But the definition you gave is the same as a closed company.

And HMRC has a nice manual defining what a closed company is but not an equivalent one for a personal service company.

[Contreras]

So if you ran a 1-man Ltd buying and selling on eBay, you're technically a PSC?

No.

But if I have 2 directors is the company still a PSC?

Yes.

You provided your services through a service company if:

• you performed services (intellectual, manual or a mixture of both) for a client (or clients), and
• the services were provided under a contract between the client(s) and a company of which you were, at any time during the tax year, a shareholder, and
• the company’s income was, at any time during the tax year, derived wholly or mainly (that is, more than half of it) from services performed by the shareholders personally.

Linky.

[SueEllen]

If you are registered as a Ltd Co then yes

But if I have 2 directors is the company still a PSC?

[LisaContractorUmbrella]

So if you ran a 1-man Ltd buying and selling on eBay, you're technically a PSC?

If you are registered as a Ltd Co then yes

[d000hg]

Love the smiley gallery d000hg

The fact is that PSC or Personal Service Company was a term that was introduced by HMR&C to distinguish between a one person limited company and a company with more than one person and therefore that can be the only definition

So if you ran a 1-man Ltd buying and selling on eBay, you're technically a PSC?

[malvolio]

...that Susie Hughes got hold of and published on shout99 a couple of weeks ago!

That were sourced from the PCG's FOI requests plus a bit of arm-twisting.

[LisaContractorUmbrella]

This is a serious thread for discussing how we define a PSC, not if it's right a PSC is treated differently.

Love the smiley gallery d000hg

The fact is that PSC or Personal Service Company was a term that was introduced by HMR&C to distinguish between a one person limited company and a company with more than one person and therefore that can be the only definition

[d000hg]

PSC - anyone who should morally pay more tax than they are legally obliged to.

This is a serious thread for discussing how we define a PSC, not if it's right a PSC is treated differently.

[tractor]

..

...that Susie Hughes got hold of and published on shout99 a couple of weeks ago!

I should have clarified, they claimed for years that they don't keep those stats when of course, we all knew that they did. Although I must admit I don't often look at S99 these days, my bad