If IR35 only applies to PSCs, what’s a PSC?

The term ‘Personal Services Company’ is not a set of words that’s written in the IR35 laws, but it’s used as a short-hand to explain the various types of arrangements which are caught by the rules. Mainly because it’s easier to say ‘PSC’ than ‘an arrangement meeting the conditions of liability under ITEPA’. You can read more in HMRC’s Employment Status Manual. See Conditions A, B & C for the full definition.

For the majority of PSC freelancers, they will be caught by the legislation because they operate via a limited company, where they are the main (and perhaps only) shareholder/director. Even if there are other shareholders/directors, if the PSC freelancer has 5% of more ownership/control, then IR35 still applies to the PSC. If in any doubt, please speak to your accountant.

Freelancers who are sole traders or PAYE employees of an umbrella company are not PSC freelancers.