In Mac Giolla Mhaith (Inspector of Taxes) v Cronin & Associates Ltd 1984 III ITR 211 the company carried on an advertising business. The High Court held that the company was not carrying on a profession so no surcharge was payable on the company’s trading income.
In Rahinstown Estates Co v M Hughes (Inspector of Taxes) 1976 III ITR 517 a close company went into voluntary liquidation and Revenue sought to impose a surcharge on undistributed investment income. Distributions made in the course of a winding up were treated as distributions for surcharge purposes, therefore it was held that the surcharge applied.
The surcharge position of a company for any accounting period should be decided by reference to the company’s status at the balance sheet date. CHW (Huddersfield) Ltd v CIR 41 TC 92
Emerging from the case of CIR v Maxse 1919 12 TC 41, the factors indicative of a profession would be a requirement for either a purely intellectual skill or for a manual skill controlled by an intellectual skill of the operation, such as painting, sculptor or surgery.
Held to be Carrying on a Profession
Actress – Davies v Braithwaite 1931 18 TC 198
Barrister – Seldon v Croom-Johnson 1932 TC 740
Journalist – CIR v Maxse 1919 12 TC 41
Optician – CIR v North and Ingram 1918 KB 705
Held Not to be Carrying on a Profession
Dance band leader – Loss v CIR 1945 ER 683
Insurance broker – Durant v CIR 1921 TC 245
Chartered secretary – Burt & Co v CIR 1919 KB 650
Photographer – Cecil v CIR 1919 TLR 164
Stockbroker – Christopher Barker & Sons v CIR 1919 KB 222
Tax agent – Currie v CIR 1921 TC 245
Professional gambler – Graham v Green 1925 TC 309
This appeal concerned surcharges on undistributed income of service companies and whether the “principal part” of the Appellants taxable income was derived from “non-professional” services. 108TACD2020
This appeal required the Appeal Commissioner to determine whether the business of the Appellant consists of or includes the carrying on of a profession or the provision of professional services, such that a surcharge on the undistributed income of a service company applied under section 441. 76TACD2021