Change in legislation means we may not be able to pay Companies by invoice

Posted by rmt22 at Feb 02, 2017 12:42 PM |
A recent change to legislation means that the University must deduct tax from payments made via Personal Services Companies.

This new legislation requires all Universities and Public Sector Organisations to deduct both PAYE and National Insurance taxes from 5 April 2017.

A Personal Services Company may exist where an individual asks the University to pay them by invoice for services that we would normally employ people on our payroll to perform. They look like an employee, they are managed like an employee, we set the work they do like an employee, they work like an employee but we are paying them by invoice.

Anyone who wishes to be paid by invoice when the work they are doing is similar to that of an employee will need to be engaged and paid as an employee, with PAYE/NI deducted from their payments either through the University’s payroll or Unitemps.

We would ask anyone who is aware of this current arrangement to contact the Tax Department ( for guidance, and HR recruitment ( will determine the correct route to engage such employees as no invoices for such services will be paid after 31 March 2017.

What is a Personal Service Company (PSC)?

  • A PSC can be a Limited Company or Partnership
  • One individual will be the majority shareholder in the Company (either directly or when you include their spouse/partner/dependents) and that individual will be the majority beneficiary from any services provided by the Company
  • The individual provides the services from the Company and is highly likely to be the only person working in that Company. The services we require from the Company cannot be provided by a team of people working at the Company
  • The work they are doing will be similar to the work of one of the University’s employees and if the individual is unavailable to work the Company will not be able to provide a substitute

Note, the above is a very high level summary of the characteristic of a PSC so please contact the tax department if you have questions.

Why might individuals set up a PSC?

These companies are generally used by Individuals to provide consultancy services to an organisation. The individual can potentially benefit from paying less tax through asking us to pay a company directly for their services than if they were employed directly by the University. Sometimes individuals simply set up PSCs for the ease of being paid for additional work they do where they are already employed by another company.

Common areas where such PSC are used are:

  • Project consultants that work on a specific project for a period of time as if they were employees of the organisation they are working with and when completed they leave
  • Interim Management/Contractors/Temporary staff
  • Freelance lecturers/teachers
  • Professionals that provide services we need as part of our curriculum but have another job (such as GPs/Doctors)

Review of suppliers and help from you

We are reviewing all of our suppliers to identify possible PSC and will be in contact with departments and individuals to clarify the position.

We would also ask that if you are aware that there are individuals engaged in such a way in your department you contact the Tax Office at to initially assess whether the individual would fall under these rules. HR will then advise of the best way to employ these individuals going forward.

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