Thanks Brendan. Paying someone else a substantial amount plus there being no evidence the payment was made seems clear. The disallowance of the expenses seems clear also. What I am not sure of is the reference to the salary the consultant drew. Does this suggest that directors must be paid a "market rate" for tax purposes? I understood that there was no lower bound on a director's salary/fees.A medical consultant sets up a company and pays someone else. Doesn't sound right.
And didn't pay herself the salary she should have been paid.
It sounds like too aggressive tax planning.
I wonder did a tax consultant advise them on this?
Brendan
LOLI wonder did a tax consultant advise them on this?
Thanks Gordon. As you say the totality of the facts seem to indicate that there was something untoward at play here. Just wondering if low directors' salaries in isolation could be used by Revenue as a basis for challenge. Recent cases regarding the close company surcharge have reduced its scope so would Revenue look for another means of disincentivising director shareholders leaving profits within a private limited company? It would be unprecedented to my knowledge but could they use what they viewed as low salaries in isolation (absent the more egregious factors in the case above) as a basis for inferring a liability. The more I write about it the more difficult it would seem to be for them to do so as the example I am thinking of would involve no attempt to extract money from the company for the director shareholders' benefit.I don’t know the detail but I’d read the low salary comments as factors in relation to the other things. i.e. there’s ambiguity about whether you paid this other mystery punter, your expenses look ropey, and your own salary isn’t normal. Ergo, this is scam central.
AFAIK tax appeals judgements are anonymised on a routine basis.I notice nobody other than the legal representative is named in the Irish Times article. Is there a reason for this?
Possibly on the set-up of the scheme but unlikely to have recommended the amounts.I wonder did a tax consultant advise them on this?
It would appear so. That's what triggered the audit in the first place.So James question is.
I am a medical consultant.
I set up a limited company.
It earns fees of €500k in 2023
It pays me €50k and retains €450k profits.
There are no distracting features like inappropriate expense claims or paying someone else who clearly did not do the work.
Would Revenue challenge the low salary?
Brendan
Revenue commenced the audit as a consequence of the gulf between the turnover of the woman’s company and the remuneration paid by it to the medical consultant.
Thanks Gordon. As you say the totality of the facts seem to indicate that there was something untoward at play here. Just wondering if low directors' salaries in isolation could be used by Revenue as a basis for challenge. Recent cases regarding the close company surcharge have reduced its scope so would Revenue look for another means of disincentivising director shareholders leaving profits within a private limited company? It would be unprecedented to my knowledge but could they use what they viewed as low salaries in isolation (absent the more egregious factors in the case above) as a basis for inferring a liability. The more I write about it the more difficult it would seem to be for them to do so as the example I am thinking of would involve no attempt to extract money from the company for the director shareholders' benefit.
It would appear so. That's what triggered the audit in the first place.
torblednam, Thank you. That seems very clear and consistent with my (albeit non specialist) reading of the law.Absolutely not, if a company has 500k of income, with 50k of it is drawn as remuneration and taxed to income tax, and the remaining 450k being recorded as profit subject to income tax, then Revenue would have nothing to challenge.
Neither Revenue nor the appeal commissioner were trying to dictate what level of salary the individual drew (or ought to have drawn), they're pointing out that there's a major incongruity that would require robust explanation and evidence, and since none is available then the balance of probabilities swings unfavourably.
They're very pleasingOff-topic: do you like fractals?!
Mr O’Higgins found that the salary recorded as having been paid to the consultant by her company “was well below that which could reasonably have been expected by a doctor of the Appellant’s expertise and seniority”.
The factor that would've triggered an audit is the high salary for the non-doctor director and the high level of expenses paid, in conjunction with the low salary for the person generating all of the company's revenue.This is the bit which confused me.
So what if is the salary was well below?
Brendan
The article said that this was what triggered the Revenue audit in the first place.I see no issue or grounds for challenge with a low salary from a high-earning company.
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