Dr. Brian Keegan:

It is hard to say. In very basic terms, the UK replaced its close company legislation with a procedure known as IR35. That procedure allows Her Majesty's Revenue and Customs to look through the corporate structure and tax the individuals as if the earnings of the company had arisen directly to themselves. It is a much more convoluted structure. The great advantage of our close company regime is that it is well defined and well understood. When I say "penal", I should clarify what I mean. If one is trying to game the system and trying to use the corporate structure to have profits taxed at 12.5% instead of at the income tax rate, one will get caught. It is for that reason that Irish business owners are careful to ensure that those rules are not triggered and that money is paid out and accounted for through the income tax system. The net effect is probably the same but the revenue authorities in the UK found they had to impose the IR35 mechanism to effectively undo the undoing that they had done on their close company regime. I hope that explains it for Deputy Murphy.