In a time of unprecedented uncertainty and fear in communities around the world, the Government’s fiscal initiatives to support businesses and individuals been have largely welcomed.
However, following announcements in support of the Self-Employed, it is understandable that based on the government guidance, those who consider themselves to be self-employed but operate via their own Personal Service Company (PSC) are left feeling confused about their applicability to the various schemes.
To assess this the first question is– Am I actually self-employed for the purpose of tax?
The government themselves defines someone to be self-employed, for the purposes of employment status “if they run their business for themselves and take responsibility for its success or failure”. This has left many asking why they may not be able to access Coronavirus support initiatives, if they are working as a self-employed person, via a Personal Service Company. The answer is because Employment Status does not always correspond to the tax status, and age-old issue that has seen the need for highly complex legislation such as IR35.
In short, Tax law will decide if someone is self-employed and exempt from PAYE and employment law will determine status and therefore employee rights.
What does Tax law say?
The relationship between an individual and their PSC is a complex one. The individual is almost certainly an office holder and for many tax purposes this is akin to an employee – of the PSC.
The most common method for contractors to operate their PSC is to draw a small salary and pay the remainder in dividends, of varying amounts. In this case, it is clear that as the PSC is operating a PAYE scheme by paying a salary, the contractor is deemed to be employed via their PSC and, unless 50% of their work is not conducted via their PSC but rather through actual self-employment, they will not be able to access the self-employed initiatives. Instead, they should, where appropriate and necessary look to utilise initiatives available for businesses.
They are as follows:
Other available initiatives for PSC Contractors:
HMRC Time to Pay
HMRC have also set up a Payment Support Service for anyone who is unable to make any other tax payments to HMRC as a result of Coronavirus;
Payment Support Service- Telephone: 0300 200 3835
How can we help you?
As specialists in advising contractors WTT can talk you through any of the above measures, to help you navigate your way through an unprecedented time. There will be no fee for this, please simply contact our client services team on 020 3468 0000 or firstname.lastname@example.org to arrange a call with one of our specialists.
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