Accounting for undistributed income

A recent tax appeal case has highlighted the issues that the close service company surcharge can create for incorporated accountancy practices

Irish tax legislation provides for a surcharge on the undistributed income of certain professional service companies that are ‘close companies’ – that is, a company that is under the control of five or fewer participators.

The recent Tax Appeal Commission Determination (108 TACD 2020) concerns the application of the close service company surcharge to a company (‘the firm’) carrying on an accountancy practice.

The case centred on whether the principal part of the firm’s income was derived from professional or non-professional services.

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