Clients who engage in the provision of professional services in the construction, engineering, aviation, shipping, computer software, finance and entertainment industries can achieve significant tax saving benefits through the establishment of a personal service company.
Personal Service Company can be characterized as follows:
- The shareholder should incorporate a company, decides on the name of the company, appoint the director and company secretary, decides how many shares should be issued and where the registered office should be;
- The company should have business bank account under the company’s name;
- The company should have a “contract for services” with the employment agency, the contract should not go through a management company;
- The money should be sent by the agency direct to the company’s bank account, but not through an intermediary or management company;
- The shareholder and director should decide how much of the gross income should be considered as salary and how much declared as dividends;
- The director should confirm and sign the annual accounts and other necessary documents;
- The company should have all required insurances on the company’s name.
Advantages of setting up a PSC:
- A PSC is the most tax effective way to work if you are outside IR35;
- You can ask for a wider range of expenses;
- A PSC will give you admission to the flat rate VAT scheme;
- You keep total control of your financial affairs. Means that you do not have to risk your money with third party administrator.
Disadvantages of setting up a PSC:
- Some of the paperwork can be complicated;
- A PSC can be costly if you contract for a very short period of time;
- You will be responsible for issuing invoices;
- There is a lot to set up, for example, a business bank account;
- A PSC is not ideal for contracts less than 30 000 Euros thousands per year.