Tax credits and notional/market rate income for PSC Director

**malvolio** · 12 February 2008, 23:07

Originally posted by dude69 View Post

17. Claimants providing services to other persons for less than full earnings
(1) If a claimant provides a service for another person and -
(a) the other person makes no payment of earnings or pays less than those paid for a comparable employment (including self-employment) in
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the area; and (b) the Board are satisfied that the means of the other person are sufficient for him to pay for, or to pay more for, the service,
the claimant is to be treated as having such an amount of employment income, or in the case of a service provided in the course of a trade or business, such an amount of trading income as is reasonable for the employment of the claimant to provide the service.

Any ideas how this pertains to PSCs paying £5-10k/year salaries to owners and income earners?

As far as I am concerned my income is £6k/year. But my last salary was £40k. And my company makes ~£100k profit.

What's a PSC?

**dude69** · 12 February 2008, 23:33

Originally posted by malvolio View Post

What's a PSC?

Personal Service Company

**Sockpuppet** · 13 February 2008, 00:05

Originally posted by dude69 View Post

Personal Service Company

They don't exist. That's a term HMRC invented to victimise small business.

**dude69** · 13 February 2008, 00:29

ok.

Well in case anyone cares, if the 'notional income' is higher than your actual £5.5k salary or whatever, then if you pay the deemed income mostly in the form of a pension, then this is potentially by far the most effective way of getting money into a pension.

If you are paid £7k salary, and your company earns £20k of profits, then it pays 22% CT. You received £15,600 = £17,333 gross

Alternatively, pay the £20k gross into a pension. You then only have income of £7k a year.

Because of the 39% withdrawal rate on tax credits, you get an additional £6,760 of tax credits (assuming you have a kid to earn this level of credits).

So net is £20k + £6.76k = £26.76k vs. £15.6k. Which is 41.7% relief, as a basic rate tax payer.

**GreenerGrass** · 13 February 2008, 08:37

Find a job spec for a disguised onshoring role, LogicaCMG could provide one - to be filled from their Indian operation. Probably half the UK salary for the same role in the same location if filled externally.

Point out to the government that it made the whole thing possible through fast track visas to address the "skills shortage" etc.

**Ardesco** · 13 February 2008, 08:38

I don't bother with a pension. It won't be worth anything when I'm old anyway. Pay enough NI to qualify for your state pension and look to other things to provide you with a worthwhile income when you're old IMHO.

**Sockpuppet** · 13 February 2008, 12:50

Originally posted by Ardesco View Post

I don't bother with a pension. It won't be worth anything when I'm old anyway. Pay enough NI to qualify for your state pension and look to other things to provide you with a worthwhile income when you're old IMHO.

How much NI do we have to pay to qualify for state pension?

**Ardesco** · 13 February 2008, 12:55

Originally posted by Sockpuppet View Post

How much NI do we have to pay to qualify for state pension?

Couple of hundred a year I think? They will send you a letter if you haven't paid enough saying that you can either pay them a lump sum of £XXX or delay your state pension by a year.

**ASB** · 13 February 2008, 13:21

Originally posted by Sockpuppet View Post

How much NI do we have to pay to qualify for state pension?

Zero.

If you earn between the LEL and the primary threshold you still get the years pension credit but pay zero in NI.

Tax credits and notional/market rate income for PSC Director