The high profile criticism of the BBC paying over 300 people through their own personal service companies (or PSC's) continues to rumble on. People are rumoured to include Jeremy Paxman and Fiona Bruce.

The annoyance stems mainly from the fact that the BBC is funded by UK tax payers hard earned (post tax) money and therefore the people receiving it should ethically also be paying tax.

It is however likely that the questioning of whether PSC's are morally correct will overflow into the private sector too? Especially as the questioning has been taking place in Parliament.

Why are PSC's not liked?

Basically the company paying into the PSC saves employers National Insurance contributions (and can in theory pay the worker more than they otherwise would of).

The company does pay Corporation Tax on the profits but by drawings the reserves as a dividend the taxation of dividends can be beneficial to the worker. The timing of dividends can also be timed to ensure paid in periods when lower tax will be payable.

The company can also benefit from registering for the Flat Rate VAT scheme where only a percentage of the VAT charged has to be paid to HMRC hence generating a Flat Rate VAT gain.

The worker can also still draw a small wage each week that is exempt from PAYE and NIC's but still accrues them pensionable and statutory benefits.

It is especially not liked for the majority of BBC workers being paid through a PSC because it is their one job and they are not contractors who normally work through PSC's.

The taxation of these people can already be caught by IR35, controlling persons and disguised employment legislation.

If you want to know more about PSC's please call PayMatters on 0800 121 6513.