Personal service company (PSC)
is a limited company through which an individual sells their own services — the standard UK contracting vehicle. The contractor owns and directs the company, invoices clients through it, and pays themselves salary and dividends. PSCs are the population the IR35 off-payroll rules target.
Why PSCs exist — and why they are scrutinised
The structure offers limited liability, business expense treatment and tax planning via dividends — legitimate when the underlying engagement is genuinely business-to-business. HMRC’s concern is deemed employment: where the individual works like an employee, the IR35 rules tax the engagement accordingly, and since 2021 medium and large clients make that status call.
For engagers the operational duty is the Status Determination Statement per PSC engagement; for contractors, insurance, contracts and working practices that match the outside-IR35 claim.
FAQ
Is a PSC illegal or discouraged now?
Neither — it remains a lawful business form, and outside-IR35 contracting through PSCs continues at scale. What ended is the assumption that the wrapper settles the tax question: the working reality decides, and clients now carry the assessment duty for most engagements.
What are the alternatives to a PSC for UK contracting?
Umbrella employment (employee of an umbrella with PAYE), agency payroll, or EOR employment for international engagements. Inside-IR35 roles usually pay via umbrella; genuinely independent multi-client work still fits the PSC.