Income vs Turnonver

tombrown

Hi,

I'd like some advice on a fairly basic question. I am deliberately leaving specifics (organisation names, exact figures etc) out, but hopefully that doesn't make the question any less understandable.

My wife is self employed and has professional membership of a national society relevant for her profession. They offer a reduced membership rate if the individual's earnings are less than a particular threshold.

My wife's accounts (that a qualified accountant puts together each year) show that her gross income (i.e. every euro she is paid during the year) exceeds this threshold, but that, once her legitimate business expenses are taken into account, the net income is lower than the threshold. It is this lower sum that is submitted to revenue as part of her annual tax return.

The society she is a member of, have quoted the gross income (turnover?) figure to justify charging her the higher rate, and refuse to listen to the argument that her net income is actually lower than the threshold.

Does their position make sense? I'd like to argue this with them further, but wanted a bit of expert advice before I do so

Hope someone can help here

ACADasltiv

If a membership body is choosing to base its fee on income then it is always going to be on turnover rather than net profit, anything else would be madness. The reason for basing it on turnover rather than profit is because your profit level can be manipulated to a certain extent. An example would be if your wife owns the building she operates from, she could pay herself an inflated rent as well as run more costs through her business in order to bring her profit level down and thus incur less in membership body fees.

If Business A has sales of €100,000 and net profit of €50,000 and Business B has sales of €100,000 and net profit of €30,000, why should Business A be penalised with a higher membership fee simply because they're running a more efficient operation?

tombrown

OK - thanks for the input; seems what I thought was logical, wasn't after all