Glossary

PSC

‘Personal Services Company’, more commonly known as ‘PSC’, is a type of limited company that is established by contractors, consultants and other self-employed workers. A PSC sells the work of an individual or small group of individuals as a limited company.

Limited Company

A private business where the owners’ debt responsibility is restricted to the amount invested. It has a legal identity of its own, separate from its owners (shareholders) and its managers (directors).

The company must file accounts and a confirmation statement each year with Companies House that are available for public viewing.

The limited company will determine what tax rules it will follow.

The company must also file a Corporation Tax return each year.

Limited Company Contractor

A worker who is usually one and the same with the Director, who operates on a contract basis through a private business where the owners’ debt responsibility is restricted to the amount invested.

Supervision

A worker who is usually one and the same with the Director, who operates on a contract basis through a private business where the owners’ debt responsibility is restricted to the amount invested.

Example: Contractor A wants to book a holiday. He informs his Manager before booking and enters in his requested dates on the clients’ holiday management system. This is either approved or rejected based on the clients’ personal discretion. This would be viewed as supervision, as the Contractor is being monitored.

Equipment

You have access to and use company equipment such as a laptop. Popular work items to consider: Work phone, work Laptop, Stationary, Office space, company vehicle.

Example: Contractor A has been given a desk, a work phone and a company laptop to design a website for his client. He also has a company email address and signature.

If someone works from home and uses their own computer, they are may be outside of IR35 because an employee of a firm would be given a computer and a desk in an office to do their job.

Substitution

An alternative worker who undertakes the operation of a contract if required.

The predominant factors that must be considered for the substitution to be valid:

The Client must agree to it
The Contractor must pay for the substitute
It should be an ‘unfettered right’ – the client cannot vet / manage any replacement

Example: Contractor A designs websites for a living and has taken on a project for one of his Clients.

Unfortunately, Contractor A is unable to take on the work himself due to other commitments, so he has substituted the work to a replacement – Contractor B, who has the same skillset as him.

The Client is aware of this and has agreed with Contractor A that the work will be substituted with to Contractor B but the Client will incur no additional charges as a result of this.

Control

You are told where and when to work / or have a Line Manager who determines the manner and method in which you deliver work. The ‘Control’ status determines whether you are truly independent when working under a contract between it and the end-client.

They are dictating to you the work you undertake, and how you go about undertaking it. Additionally, you are controlled if someone has the power to move you from one job to another.

Example: Pimlico Plumbers Ltd and Mullins v Smith (2017). The contract stated that the worker was an independent contractor who had to raise his own invoices and was VAT registered.

However, he worked full time providing services to the plumbing company and was required to wear a uniform, drive a van which advertised the plumbing company and was subject to restrictive agreements.

The Tribunal found when considering the amount of control placed upon the worker by the plumbing company that he should not be treated as self-employed.

Financial Risk

You are paid at regular intervals and are not subject to financial penalties for non-delivery of working.

Example: Contractor A costs and agrees a project, if the delivery takes longer than anticipated the contractor absorbs that cost.

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