Who is my employer if able to use a PSC? Who is my employer if able to use a PSC?
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  1. #1

    Nervous Newbie


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    Default Who is my employer if able to use a PSC?

    If anybody can recommend a company that can provide information on contractor law and IR35 in particular would be great!

    In the process of getting my agency to issue me with a new contract when my current one expires. Which as seems to be the norm has been blanket assessed as being inside...

    Now what I am struggling to understand, is that my agency has offered me the option of either having an OPW suitable contract issued to my limited company or to move to an umbrella company.

    If I chooe payments to be made through a PSC, then to quote "your pay rate will be recalcuated to account for the employers and apprenticeship levy, and the employer tax and NI will be deducted from monthy invoice". Kind of get that as guessing it means the agency do my NI/PAYE caculations and I get a net payment after tax to my limited company. So can then issue a wage, tax already having been deducted at source.

    What I don't get is that the agency is saying not my employer, even though they are doing the tax calculations and deductions? There respone being "if you were to remain via a PSC the contractual relationship would be end-client to agency, agency to PSC. Therefore agency pay the PSC, not an employer. Tax liability lies with your PSC"

    My confusion isn't around my tax getting deducted at source, is fne. What I am struggling to understand is how can the agency if they are doing the payroll (which by doing those deductions at source is surely the case?) not be my employer? I do not want to be liable if the agency screw up my deductions since I have had no control over that apart from my accountants when reviewing the company's accounts highlighting a potential issue, Nor how holiday and sickpay would work since the agency make the deductions but have no responsiblity as not employed by them?

    I feel may just be easier to accept payments through an umbrella company as that relationship makes sense to me, this just confuses the hell out of me!

  2. #2

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    Options are pay the Ltd minus whatever obligations the fee payer has and you do your own PAYE, the agent does PAYE and pays you a salary personally or you go brolly.

    We didn't expect many agencies pay the LTDs as it leaves a risk on them if you don't pay your taxes properly. We envisaged it would be PAYE or brolly. You've got an extra option to consider.

    This isn't a legal thing really its an accounting question so your account would best first bet to understand how it all works and what your obligations are.

    That said it has been discussed on here a few times so could try the Google search as explained in the Welcome section.
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    P. S. On a pedantic note. Just be careful using the term employer.
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  4. #4

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    I would say that the "employer" for tax purposes is more than likely to be your PSC.

    The agency is acting as a payroll provider, calculating and making tax deductions as required by tax law.

    They are no different to an umbrella and yes, you are right, an umbrella may be more used to acting that way and perhaps less expensive.

    Income due to the PSC that has already been taxed (by the agency) will be excluded from the company's income for tax purposes.

    In effect because the agency is treating you as an employee then that money is not taxed again at PSC level.
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