Revenue updated the Tax and Duty Manual – Part 13-02-06 – Surcharge on undistributed income of service companies – to clarify that, for the purposes of determining income as professional or non-professional in nature, income should be considered on a client-by-client basis relative to the services provided. The CCAB-I made representations to Revenue through the TALC forum to provide for this measure as the previous update to the manual did not recognise the client-by-client approach.

The updated manual provides:

“In order to determine whether income is professional or non-professional in nature, the income of a professional service company should be considered on a client-by-client basis relative to the services provided. For example, where the company provides only bookkeeping or payroll services to a client, that income will be considered to be non-professional in nature. While accountancy comes within the meaning of profession, bookkeeping, payroll and VAT compliance activities would not in themselves constitute a professional activity.”

The current version of the manual now more closely aligns with the determination of the Tax Appeals Commissioner in 108TACD2020.