A Personal Service Provider (PSP) refers to a company which offers particular services and in reality it is the person providing the services who represents the company. Such as an accountant who sets up a company to offer his/her services and is the only director/employee. The PSP is treated as an employee for tax purposes and tax must be withheld at 28% by the client and deductions available to the PSP are very limited (akin to a salaried employee).
An independent contractor is an individual (unlike a PSP which is a company) who offers services to various parties in their personal capacity. Independent contractors are taxed in 3 different ways depending on how they perform their services. Please check out our decision tree : Am I an Independent Contractor? to see the different ways an independent contractor is taxed. (i.e 1. PAYE is withheld just like a salaried employee 2. PAYE is withheld at 25% 3. no PAYE is withheld and the contractor is responsible for their own tax affairs via the provisional payment system).
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