What is meant by 'set up'?
The trade must not have been previously carried on by another individual or company.
The activities of the new trade must not have been part of a trade previously carried on as part of another person's trade or profession.
What is meant by Profession?
Trade will not include professions, providing professional services, exercising an employment, or the provision of services to a business entity carrying on a profession or exercising an employment.
Neither the Finance Bill nor the Taxes Acts define 'profession'. In a court case in which the matter was examined, it was stated that 'profession' involves an occupation requiring either intellectual skill, as in painting, sculpture or surgery, or skill controlled by the intellectual ability of the operator. It distinguished this from an operation which is substantially the production or sale of commodities.
While certain activities clearly fall within this definition, and are accepted as being the exercise of a profession, such as medicine or law, there may be questions about the status of others. Each case should be examined with regard to its own particular facts and the question of degree is important.
The following activities are considered by Revenue as not constituting the carrying on of a profession:
Advertising agents, auctioneers of livestock in a cattle mart, insurance brokers, the operation of a retail pharmacy, public relations companies and stock brokers.
A trade consisting of dealing in or developing lands, excluding construction operations, will not qualify. Neither will a company working minerals or operative mines, which has implications for sand pits, gravel pits etc.
The tax authorities regard the following as being professions, and therefore not qualifying for the new exemption: accountant, actor, actuary, archaeologist, architect, auctioneer/estate agent, barrister, computer programmer, dentist, doctor, engineer, journalist, management consultant, optician, private school, quantity surveyor, solicitor, veterinary surgeon. This list is not exhaustive.
Another example of the subjectivity of this relief is that accountancy comes within the meaning of profession, while book-keeping, payroll and VAT compliance activities, would not in themselves constitute a professional activity.
Exemption does not apply to individuals
It is necessary for the business to be carried on by a limited company, and an individual person setting up a new business would not qualify.
Will the new business be profitable?
Some start-up businesses may not yield profits for a number of years, and these losses can be valuable to off-set against the other taxable profits and income of the individual (non-limited company).
If the business is not likely to be profitable in year one and two, the value of this relief requires more detailed examination. The tax exemption is therefore of maximum benefit where the start-up business is generating profits from year 1.
