Section 32 increases the threshold for application of the close company surcharge from €635 to €2,000 of undistributed investment and rental income. This threshold will also apply in calculating the surcharge on undistributed trading or professional income of certain service companies. This takes effect for accounting periods ending on or after 1 January 2013.
A close company surcharge of 20% of a company’s distributable rental and investment income is imposed if the company has not made a distribution of the relevant income within 18 months of the end of the accounting period.
If the close company is a professional services company e.g. an engineering company a surcharge of 15% may arise on half the distributable trading income of the company if a distribution is not made within the same time period.
HI
What if the company made losses in the years leading up to the year the surcharge arises ? If they have a negative balance sheet in the previous year does this affect the surcharge in the current year?
There are two seperate Close Company surcharges.
Investment income surcharge applies to estate and investment income of a close company (Section 440 TCA 1997). A surcharge of 20% applies to the after tax Investment or rental income income. Where the excess is less than €2,000 there is no surcharge. There is marginal relief.
Professional Service Company surcharge (Section 441 TCA 1997). A surcharge of 15% applies to the after tax income from professional service companies. Again where the excess is less than €2,000 there is no surcharge. There is marginal relief.
A loss in 2015 will not get rid of a liability to the surcharge in 2014. Only dividends voted for 2014 before 30 June 2016 will.
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Undistributed income for Y/E 31/12/2014 would give rise to a surcharge payable on or before 23 September 2016.
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