# Close Company Surcharge



## apple (27 Apr 2009)

Hi Guys

Quick one for you. 

My Brother and I are directors in our own compnay 50/50 shareholding.

We paid ourselfs a small salary and paid it through ros every month.
We made a profit of 5K this year and I was just wondering do we have to pay a close company surcharge on this profit, we are service providers.
Cheers.


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## Graham_07 (27 Apr 2009)

Check Section 441 Taxes Consolidation Act 1997 . Revenue have this [broken link removed] ( part 13 in the list). Not all close service companies come within the remit of S.441. As you see it is mainly, but not exclusively those providing "professional" services. There is a detailed definition and examples in the Act. So for example a civil engineer would come within it but a contract cleaning service would not.


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## apple (27 Apr 2009)

Hi Graham

Thanks a million for that. I had a read of it and just to double check it, we provide IT consultancy so would it apply and also if out profit was 5K what do we have to pay and how do we pay it. sorry for all the questions.


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## Graham_07 (27 Apr 2009)

Check out Tax Briefing 48 page 19. which gives more information. It mentions COmputer Programmer as coming within the remit of S.441. If you meet that definition then the answer would be yes. You'll also note that they say the list is not exhaustive. The surcharge in any year is only calculated in the submission of the following years returns. Again see the original link. If in any doubt make sure to discuss the matter with your professional advisors. Getting this type of item wrong can be costly in terms of tax liability. 

www.revenue.ie/en/practitioner/*tax*-*briefing*/tb48.pdf


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## apple (27 Apr 2009)

Graham

Again thanks a million.


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## PeterSellers (28 Apr 2009)

I'm not an expert but I thought the surcharge only applied to the portion of undistributed income that is greater than 50% of distributable trading profit. 

Assuming the salary paid to yourselves is greater than €5000, and assuming the €5000 you mention is distributable profit, then would you have no surcharge liability?

Is director's salary considered distributed trading profit?

I wouldn't mind knowing the answer to this myself


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## PeterSellers (28 Apr 2009)

I'm not an expert but I thought the surcharge only applied to the portion of undistributed income that is greater than 50% of distributable trading profit. 

Assuming the salary paid to yourselves is greater than €5000, and assuming the €5000 you mention is distributable profit, then you'd be ok??

I wouldn't mind knowing the answer to this myself


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## Gervan (28 Apr 2009)

Director's remuneration would be part of the expenses, so if the company made a profit of  €5000 that would be after paying the directors.

I'm no lawyer, but there is some restriction in Company Law as to what a company may distribute, with regard to its capitalisation / distributable reserves, so it's not just about calculating numbers. If Company Law forbids making a distribution ( for example if there are losses brought forward and the company has very low or negative net assets) that would take preference ober the tax laws.


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## Graham_07 (29 Apr 2009)

Directors remuneration / salary taxed under PAYE is deducted like any other expenses. The surcharge is applied to the distributable income after these expenses have been deducted. If there is a surplus which is available for distribution but which has not been distributed then the surcharge is calculated. Bear in mind there is also a  separate surcharge ( 20% )  on non-distributed investment/estate income (S.440TCA 1997) so if a close company which meets the criteria for "service" companies as outlined above also has undistributed investment income then there are 2 separate calculations to be done.


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## rustyjack (29 Jun 2009)

hello,

i have a related query. What if the limited company has debt? In this case, my company has significant rental income but also significant debt. Can my company pay off debt without incurring surcharge on rental income?

Many thanks,
Rusty


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## Graham_07 (1 Jul 2009)

rustyjack said:


> hello,
> 
> i have a related query. What if the limited company has debt? In this case, my company has significant rental income but also significant debt. Can my company pay off debt without incurring surcharge on rental income?
> 
> ...


 
Expenses such as interest on loans for the purposes of the business would be allowable against income, as would be capital allowances on writing down allowable fixed assets purchased with loans.  However using income to repay loan capital does not of itself give automatic rise to a deduction. For example in the case of a loan for buildings the loan interest would be allowable but not the repayment of the capital.


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