05: Services within the rules

The personal service company rules only apply to contracts that would amount to employment if the individual worked directly for the client. If the terms of an engagement are more indicative of self-employment, you do not have to make the deemed payment calculation.

It is often difficult to decide on which side of the line an engagement falls. The overriding principle is that self-employed people have to be in business on their own account. An engagement may have some indications of employment, such as an hourly rate of pay, and some of self-employment, for example a high degree of autonomy over how and where you work. One has to look at the overall picture.

Some other points:

• Domestic services, such as nannies, are within the rules, though originally they were excluded.
• You cannot escape tax and NIC merely by setting up your intermediary company offshore. However, you are unlikely to have to pay tax and NIC on a deemed salary if you work overseas for a client that is itself based overseas.
• The fact that the intermediary might be paid by an employment agency rather than directly by a client does not affect the operation of the rules.
• The intermediary need not be a company but could be a partnership or even an individual.