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Professional firms

Individual professional practitioners who redirect their income to an associated entity to reduce their tax liability.

Last updated 30 April 2023

Our concerns about arrangements

We are concerned about arrangements involving individual professional practitioners who redirect their income from a business or activity that includes their professional services to an associated entity where it has the effect of significantly reducing their tax liability.

Arrangements that attract our attention include those that lack commercial rationale or have high-risk features.

Arrangements that lack commercial rationale

Arrangements that lack commercial rationale:

  • seem more complex than necessary to achieve the relevant commercial objective
  • appear to serve no real purpose other than to gain a tax advantage
  • have a tax result that appears to be at odds with its commercial or economic result
  • result in little or no risk in circumstances where significant risks would normally be expected
  • operate on non-commercial terms or in a non-arm's length manner
  • present a gap between the substance of what is being achieved and the legal form it takes.

Arrangements with high-risk features

Arrangements with high-risk features:

  • have financing arrangements relating to non-arm's length transactions
  • exploit the difference between accounting standards and tax law
  • are materially different in principle from Everett and Galland
  • involve multiple classes of shares and units held by non-equity holders.

Guidance on allocation of profits

For more information on the allocation of profits and our compliance approach, see: