A recent decision of the Tax Appeals Commission is very significant for practitioners with consultant clients trading through companies.

Previously these companies were caught by the professional services surcharge. This left them with a choice of either:

• taking a distribution of the profit at marginal rates of Income Tax /PRS I /USC or
• paying a non-refundable surcharge

The appeal case concerned a management consultant trading to his own company. The decision was that “management consultancy” was not a professional service. Therefore, the company was not caught for the surcharge.

The rationale for the decision is important as it can be applied not just to a management consultancy, but to other services.

The Commissioner set out the requirements for a “professional service” to be:

• certain educational requirement
• relevant experience requirement
• public interest dimension
• regulatory control over providers

In the case of management consultancy there was an absence of:

• formal educational structures
• regulatory control

This meant that a management consultancy could not be a professional service company and therefore the surcharge did not apply.
Revenue have now amended their manual to specifically exclude management consultancy companies from the definition of a professional service. They have not requested that case be stated for the High Court.

This means that they have accepted the decision.

Apart from specific management consultancy firms, these requirements could be applied to other activities which are not controlled by regulatory bodies e.g. IT consultants

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