Personal service companies

In some industries – such as IT and engineering – it is common for external consultants to supply their services through their own limited company. For example, Sandy might form his own limited company, Sandy Limited, which then provides his services as a computer programmer to a large Public Limited Company.

This can cause problems if the way you work is just like being a direct employee of the other business. For example, Sandy might work alongside employees of the Public Limited Company, as part of the team, doing a very similar job. If this is so, there are special tax rules which cancel the tax advantages of working through your own company. You are taxed as though you worked directly for the other business.

This is a very complex area and it is always prudent to take professional advice. There is guidance on the HMRC website here:http://www.hmrc.gov.uk/ir35/.