Taxes Consolidation Act 1997 section 441

Surcharge on undistributed income of service companies

Section 441 imposes a surcharge on undistributed income of service companies.

• A "service company" is a close company whose principal income derives from carrying on a profession, providing professional services, exercising an employment, or providing services or facilities to a person or partnership that is professionally involved or connected with such.
• A 15% surcharge applies to the excess of the company's distributable estate and investment income plus 50% of its distributable trading income over its distributions for the accounting period; a 20% rate applies to the portion of the excess attributable to undistributed estate and investment income.
• No surcharge arises where the excess is €2,000 or less (proportionately reduced for short accounting periods and shared among associated companies); marginal relief restricts the surcharge where the excess is slightly above €2,000.
• The surcharge cannot be avoided by transferring undistributed income to capital reserves or issuing bonus shares, and standard corporation tax rules on assessment, collection, and appeals apply.

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