Questions and Answers

Contractors Surcharge

Q. I am a self employed contractor operating through a Limited Company. I was of the opinion that my tax rate in the company would 12.5% on any profits left in the company after I take a salary. I have now been told that the company may be liable for a “professional services surcharge” What is this and does it apply to me?

A. The tax laws provide for a surcharge on certain undistributed income of service companies i.e. profits left behind after you take your salary.

The surcharge will apply to one man band contractors trading through a limited company where the company generates income by providing professional services/carrying on a profession/holding an office or employment.

These tax rules do not directly define what a “profession” is but Revenue have said that they regard the following list of professions to fall within the scope of the surcharge:

Accountant
Actor
Actuary
Archaeologist
Architect
Auctioneer/Estate Agent
Barrister
Computer programmer
Dentist
Doctor
Engineer
Journalist
Management Consultant
Optician
Private School
Quantity Surveyor
Solicitor
Veterinary surgeon

An experienced accountant can guide you through these rules and clarify if these rules apply to you and, if so, ensure that the additional taxes are calculated correctly.

Date published 27 Jan 2017

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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