should a hospital consultant set up a limited company?

[rupert7]

my wife (a hospital consultant) has been advised to set up as a limited company for her private work.
would this be open to interpretation in the event of a revenue audit?

 

[mathepac]

I seem to recall the IMT ran a series of articles some time ago about this specific topic, pro and con; it might be worth referring to the online archives as a starting point. https://www.imt.ie

 

[Gordon Gekko]

This is an area that is fraught with danger. It was the subject of a major investigation / audit programme by Revenue as a number of consultants undertook incorporation in an aggressive manner, particularly in the way that goodwill was treated.

There is nothing wrong with a consultant operating through a corporate per se, but it must be done correctly. If I were her, I’d go to the Big 4 for the relevant tax advice.

 

[dublin67]

The major area of danger, in my understanding here, is the value that is attributed to goodwill when the consultant sells his practice to a company and CGT paid on that basis. The goodwill that was used, according to media reports, was a multiple of earnings. I don't see a danger if goodwill isn't been recognised and I would recommend specialist tax advice from a specialist in the area.

 

[Joe_90]

We have looked at this at various times over the years.

There are just too many issues.

There is a question whether some professions can in fact incorporate. The last time I looked doctors dentists and solicitors could not incorporate their business. They could however incorporate an admin company which provided services to the professional practice.

The potential exposure to VAT from the company to the exempt practice could potentially make the arrangement redundant.

I think there was a practice in Dublin advising professionals to incorporate and who have had a very difficult time with Revenue.

 

[rupert7]

The major area of danger, in my understanding here, is the value that is attributed to goodwill when the consultant sells his practice to a company and CGT paid on that basis. The goodwill that was used, according to media reports, was a multiple of earnings. I don't see a danger if goodwill isn't been recognised and I would recommend specialist tax advice from a specialist in the area.

this is exact what my advisor said when i questioned if revenue would be an issue

 

[rupert7]

We have looked at this at various times over the years.

There are just too many issues.

There is a question whether some professions can in fact incorporate. The last time I looked doctors dentists and solicitors could not incorporate their business. They could however incorporate an admin company which provided services to the professional practice.

The potential exposure to VAT from the company to the exempt practice could potentially make the arrangement redundant.

I think there was a practice in Dublin advising professionals to incorporate and who have had a very difficult time with Revenue.

this is my worry.
i dont want to be in a position where we are looking at a huge tax bill plus interest in 6 or 7 years time.
even if one of "the big 4" recommend it, is that enough?
would it be prudent to go to revenue and say this is what we are doing, is that acceptable or would that be drawing an audit on ourselvea?

 

[T McGibney]

this is my worry.
i dont want to be in a position where we are looking at a huge tax bill plus interest in 6 or 7 years time.
even if one of "the big 4" recommend it, is that enough?
would it be prudent to go to revenue and say this is what we are doing, is that acceptable or would that be drawing an audit on ourselvea?

Unless she's earning serious bucks, your wife will most likely find big 4 fees out of her range. If she's interested, she should discuss the specifics with the person who advised her to do it. Unless there's a compelling reason for the switch, she's probably better off leaving well enough alone.

 

[dublin67]

You won't be able to get Revenue clearance. It all depends on the potential earnings. The advantages of the structure, in my view, include that you can fund a pension scheme to a high level and potentially obtain retirement relief on the retained earnings at age 55 or older. Others may have views on the availability of retirement relief. Another advantage is that the higher rate of USC doesn't apply so the marginal of tax is 52% and not 55%. This latter reason is unlikely, of itself, to be sufficient to go into a corporate structure.

It isn't beyond the reach of the Revenue to argue that goodwill has been transferred (they can and do adopt any argument to maximise tax) so a section 600 may be a belt and braces solution.

The last time I examined this issue there wasn't a legal barrier (Medical Practitioners Act 2007) to doctor practising through a company. The legislation requires that medicine is carried out by a doctor. Additionally there wasn't anything in the Medical Council regulations which prevented it either. This was about 8 or 9 years ago so it may have changed. I didn't examine the situation with the dentists.

 

[rupert7]

You won't be able to get Revenue clearance. .

if they would not clear it does that mean that we would always be facing the posibility of a tax bill down the road if revenue decide that they don't like it?

we are happy enough for our particular situation and plans that there are enough benefits to form company but if we thought it was dicey from a Revenue point of view i dont think it would be worth the worry.

 

[Conan]

If memory serves we well, I think Revenue recently challenged a number of medical consultants who converted to company status. So whilst the theory has some merit (goodwill, expenses, better pension funding etc), I think it is not a slam-dunk. Some Accountancy firms have actively promoted the conversion, but not always with the desired outcome.