IR35

What is IR35? What is a Personal Service Company (PSC)?

An individual worker might deal with a client business through a third-party intermediary, typically the worker’s own personal service company (“PSC”) – please see below as to what a PSC is. Depending on the circumstances, the IR35 rules might apply to that situation (but will not apply if a PSC is not used). If the IR35 rules do apply, their effect is to treat the person who works through the PSC as employed where, if they had instead worked as an individual (and not through a PSC), the law would have regarded them as employed, not self-employed. For detailed information please click on the information links and "Related Documents" below.

If you are an individual who proposes to (or does) work through a PSC or you propose to (or do) engage an individual who will (or does) work for you through a PSC, you should read the following pages.

Where a PSC is used, it is the PSC, not the worker, who contracts with the client and receives payment from the client, with the aim of saving tax/NIC. The worker is only paid by the PSC by way of share dividends and sometimes a salary. This way of working is used by a worker because they consider it more beneficial to themselves to do so than to be engaged directly by their client as either an employee or self-employed person. It might also suit the business client because it does not have to administer PAYE nor does it have all of those legal duties and obligations which are enjoyed under the law by employees.

Use of a PSC was a common practice, particularly in the IT and media sectors, but over the years the IR35 rules have been progressively tightened up, and so there is now often little to be gained by a worker from using a PSC. Measures tightening up the IR35 rules were introduced in 2017 and 2021 to add further constraints on the freedom to use a PSC and any benefit from doing so. There might also be additional changes to IR35 in the future.