Autumn Statement - personal services companies tax

Reports have been appearing in the press that the Government may announce measures to tighten up tax rules for personal service companies in its Autumn Statement on 25 November.

The term ‘personal service company’ is not clearly defined, but it is commonly used to describe a business structure where there is an intermediary - commonly a company - which sells the work – the services – of an individual or a group of individuals and is owned and operated by the same individual or group of individuals.

The new measures being mooted indicate that after only one month, workers operating via a personal service company will have to be moved onto the payroll and have PAYE & National Insurance Contributions (NIC) deducted from their earnings in the same manner as any other employee. The engaging business would also have to pay employer’s NIC.

The effect of the measure is aimed at combating the tax and NIC advantages of operating as a personal service company. HM Revenue & Customs frequently view these arrangements as being set up to avoid tax and NIC on what they view to be an employee/employer relationship rather than one of contractor/client.

Whether such measures will be announced, or whether there will simply be a consultation regarding the proposed legislation, we will keep you up to date with all of the important announcements from the Autumn Statement.

For further information or advise contact Carolyn Byrne on 01522 541 181.