Questions and Answers

Contractor Trading Through Limited Company

Q. I am a contractor trading through a Limited Company. I have recently heard that the company may have to pay additional taxes if I am deemed to be conducting “professional services” through my company. Is this correct?

A. There is a Revenue rule that imposes an additional tax on top of the usual 12.5% corporation tax rate in certain circumstances. This is known as the professional services surcharge.

The rules do not define what the term “profession” means but the following list is indicative of the types of services that could potentially fall foul of this rule. This is by no means an exhaustive list and what constitutes a professional services company would require careful consideration by your accountant.

Accountant

Actor

Actuary

Archaeologist

Architect

Auctioneer/Estate Agent

Barrister

Computer programmer

Dentist

Doctor

Engineer

Journalist

Management Consultant

Optician

Quantity Surveyor

Solicitor

Veterinary Surgeon

If you are deemed to fall within the definition of a professional services company then a surcharge of 15% of half of the profits of the company which are undistributed (i.e. not taken from the company by means of a salary/dividend) is imposed and added to the annual tax bill of the company.

This is an area of increasing focus for Revenue and if you are a contractor trading through a Limited Company it is good practice to review your circumstances with your accountant to ensure that you are not falling fall of this or any other tax rules.

Date published 23 Feb 2018

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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