Could Incorporation Improve the Financial Rewards from Your Practice?
If you feel that you're not getting sufficient financial rewards for the long and hard hours spent growing your practice, often in stressful, deadline-driven conditions, than you may consider a practice incorporation. Does it seem like Revenue deducts too large a chunk of tax relative to what you draw from the business?
And what about the value that you have built up over years of providing crucial services to clients? While practicing accountants generate good profits, there is not always financial recognition of the value built up in the firm.
If these concerns sound familiar, then incorporation could well be the way forward.
Once the process is properly executed, Revenue can be easily satisfied that the acquisition of goodwill is within the requirements and spirit of the legislation
If you want to explore incorporating your accountancy firm, email us or call us on 053-9100000 to start the process and get initial guidance on the opportunities open to you.
How We Can Help
Since S.I. 220 of the Statutory Audit Directive2010 has enabled the incorporation of audit firms, this route has become increasingly popular with practice owners – and OmniPro has worked with hundreds of accountancy firms, guiding them through the incorporation process.
Selling your practice to the new limited company provides an opportunity to realise goodwill created in the business as a capital disposal. Operating through a company will reduce your exposure to the higher rate of tax.
Incorporation can be used as part of succession planning to bring in the next generation of partners and transition the firm in a way that works for everyone.
If the advantages of incorporation are so clear cut, however, why isn’t everyone doing it?
Fear of future Revenue interventions and audits are commonly cited reasons for failing to act. Accountants mistakenly look to the experience of medical practices that incorporated in recent years. With the incorporation of an accountancy firm, where a different set of issues are at play, our experience is that once the process is properly executed, Revenue can be easily satisfied that the acquisition of goodwill is within the requirements and spirit of the legislation.
If you have not yet incorporated, it is worthwhile looking at your options before any potential changes. Every year as the budget approaches, there are rumours of changes to the legislation that could have a negative impact on opportunities for tax payers. Sometimes these rumours materialise; sometimes they don’t. Relevant areas in play in practice incorporation include entrepreneurial relief and the CGT Rate of 10%, combined with elements of the Taxes Consolidation Act in relation to intangible assets.
Steps Involved in Advising on Practice Incorporation
The incorporation of an accountancy firm is not like incorporating an ordinary trading business: there are additional regulations and legislation to consider. We can advise on these considerations and work with you through.
- The incorporation process
- Institute Audit and Practice regulations
- Company law requirements
- Valuation of goodwill
- The tax implications of the transaction, including Capital Gains Tax, Stamp Duty, Income Tax, VAT and PAYE