Chartered
Tax
Consultant
Stage 2 Module 6
Corporation Tax
4th and 5th March 2011
Chartered Accountants House
www.charteredaccountants.ie
EDUCATING
SUPPORTING
REPRESENTING
Learning Objectives
• Scope of Irish Corporation Tax
• Resident and Non Resident Companies
• CT Framework – Rates and accounting
periods
• CT computations - 10 Principles
• CT Compliance – Tax return filing,
payments and assessments
Introduction and Overview
•
•
•
•
•
CT legislation
Previous modules - Income Tax and CGT
Irish CT policy and 12.5% rate
Strict rules and tax law apply
Step by step analysis of CT computation
Scope of CT
• Resident Co = CT on Worldwide Income
• Non-res Co trading in Ireland = CT on Irish trading
income
• Non-res Co not trading in Ireland = No CT but IT
on Irish source/CGT on specified assets
• …Residence is key!
Company Residence
• Irish Tax Law
– Sec 23A(2) TCA 1997 – general rule Irish
incorporation
– Sec 23A(3) and (4) – trading and treaty
exemptions
• Case Law
– Central Management and Control
• Double Tax Agreements (CTC Stage 3)
Central Mgt and Control
• Case law established this basic concept
• UK cases – De Beers Consolidated Gold
Mines v Howe (5TC 198)
• A Co is resident “where the central
management and control actually abides”
• Must determine location of central mgt
and control (CMC)
Where is CMC located?
• Review corporate governance processes
– Who decides on high level strategy?
– Where are these decisions taken?
Case Law Tests
LOCATION OF MEETINGS AND COMPANY RECORDS?
Directors’ meetings
Books of account
Negotiation of major contracts
Accounts prepared and examined
Matters of important policy
determined
Accounts audited
Dividends declared
Profits realised
Statutory books and company
seal
Bank account
Majority of directors resident
Shareholders’ meetings
Head Office
Company Residence
Summary:
• No single factor determines residence
• Combination of tests used to establish
CMC
• Company not incorporated in Ireland?
Residence determined by location of CMC
Residence – Irish Incorporation
• Sec 23A TCA 1997
• Sec 23A(2) TCA – Irish incorporated
companies are Irish resident
• Sec 23B TCA 1997
– Societas Europaea (SE) and European
Cooperative Society (SCE) with registered
office in Ireland
– Treated as resident in Ireland
Incorporation Test
•
• E Ltd incorporated in
Ireland
• Carries on business
•
exclusively in Isle of Man
•
• Majority of directors
resident in IOM
•
• Board meetings in IOM •
• All decisions made in IOM
Where is management
and control
exercised?
Isle of Man
Where is company
resident?
Ireland – S 23A TCA 97
No Treaty/Trading
exemption
Incorporation Rule Exceptions
• Treaty Exception
• Place of incorporation rule does not apply
where the company is resident in a Treaty
country
• Sec 23A(4) – DTA tie breaker clause
holds
• Co generally resident where CMC located
Incorporation Rule Exceptions
• Treaty Exception example
• Beckett Solutions Ltd is incorporated in
Ireland
• Co is also resident in France under
French law
• Tie-breaker clause in Irish/French DTA
treats Co as resident in France
• Sec 23A(4) TCA – Co resident in France
Trading Exception
• Sec 23A(3) TCA 97
• “Relevant Company”
• Does company (or related* co) carry on a
trade in Ireland? And
– Is the company under ultimate control of
>50% residents of an EU/DTA country? Or
– Quoted on stock exchange (or in >50%
relationship* with QSE Co) in EU/DTA
country?
*related = 50% group - real and substantial
Trading Exception
• Where Sec 23A(3) TCA applies
• Irish incorporation test does not apply
• Company is resident under central
management and control test
Trading Exception
• Examples
Trading Exception -1
• Micro Ltd Irish
•
incorporated Co
•
• 1 Irish & 2 Bermuda dirs
• All board meetings in Ber •
• Micro’s trade in Bermuda
• 60% Micro owned by
Macro – quoted on ISE
• Micro owns 55% Mega, •
•
an Irish trading co
Relevant Co?
Yes – owned by
>50% EU listed co
Trading condition met
as Mega is >50%
owned and trading in
Ireland
CMC test applies
Micro is resident in
Bermuda
Trading Exception -2
• Avoir Ltd is Irish
incorporated
• Carrying on a trade in
Argentina
• CMC is in Argentina
• Avoir owns 62% of
Irish Trade Co
• Avoir is owned by 4
French resident
individuals
• Is Avoir a “relevant
co”?
• Yes - >50% controlled
by EU residents and
• Meets trading
condition with 62%
sub
• Avoir resident in
Argentina – CMC
rule
Trading Exception -3
• Éire Ltd is Irish
incorporated
• Carries on a trade in
Kenya
• Owned by a UK res co
• UK co by 2 individuals
resident in Kenya
• Éire owns 82% in an
Irish trading company
• Where is ultimate
ownership?
• Kenya – not EU/DTA
• Trading is met but
Éire is not a “relevant
co”
• S23A(2) applies
• CMC N/A
• Éire is resident in
Ireland
Trading Exception -4
• Anois Ltd is
incorporated in Ireland
• 2 Irish resident
individuals own 100%
of Anois
• Anois carries on its
trade in Argentina
• Anois is managed and
controlled exclusively
in Argentina
• Is Anois a “relevant
co”?
• No - the company
does not carry on a
trade in Ireland
• S 23A(2) treats Anois
as resident in
Ireland
Non Resident Companies
• Sec 25 CA 97
• No CT liability unless the non res co
trades in Ireland through a branch/agency
• Sec 4 TCA 97 defines branch or agency
• “any factorship, agency, receivership,
branch or management”
• Non trading Irish branch – Income Tax
• Non trading Irish branch – CGT on SA
UK Co
Scope of Charge Irish Branch
Company resident in UK with Irish Branch
Dublin Branch
Irish tax
liabilities?
Trading profits Dublin Branch
Irish CT
Branch deposit account in
Dublin and London
Rental income from London
property purchased from
branch profits
UK Co’s Galway rental property
Irish tax
liabilities?
n/a
Irish CT -interest n/a
and fx gains
Irish CT n/a
income and
gains
No charge
Irish IT on
rents
Irish CGT
on gain
Non Resident Companies.
•
•
•
•
Start CT comp with Irish branch accounts
Include investment assets of branch
Include income from assets
Assets held outside Ireland
– Has Irish branch made the investment? or
– Has Head Office made investment?
– S Murphy v Dataproducts (ITR Vol IV p 12).
How is CT computed?
•
•
•
•
•
•
Legal Framework
CT Rates
Trading v Passive Income
Accounting Periods
From Financial Statements
10 Principles
CT comps
Legal Framework
• Sec 26(3) TCA 1997
• CT charged for each calendar year
• Assessments made for Accounting
Periods
• Sec 27 – rules for APs
• CT assessment is apportioned between
relevant calendar years where CT rate
changes
Legal Framework
•
•
•
•
Sec 26 TCA 97
Sec 26(1) – CT is worldwide
Sec 27(1) – Arising basis
Sec 26(2) – Special situations
– Trust/partnership/liquidation
• Sec 26(3) – Rate by calendar year
CT Rates
•
•
•
•
•
CT Rate set in Budget
CT introduced in 1977
CT Rate 1982-88 – 50%
2003 to date 12.5% (standard rate)
Sec 21(2) TCA 97 dis-applies IT to Irish
Resident Co liable to CT
• Non-Res Co liable to CT on branch profits
CT Rates
• Sec 21A TCA 97 higher CT rate of 25% on
passive income: Sch D Case III, IV and V
• Sec 21A(4) – 25% rate not applicable to
Case I interest by certain insurance cos
• Sec 21A(3) – 25% rate on income of an
“excepted trade”
– Dealing in or developing land – Sec 639-647
– Working minerals, turn and peat
– Petroleum activities
CT Rate – Mixed activities
• Apportionment of
receipts and
expenses
• Just and reasonable
basis
• Net income taxed @
12.5%/25%
• Builder buys land –
trading stock
• Builds on part of land
• Profits on sale of
building @12.5%
• Profit on sale of
undeveloped land @
25%
CT Rates Summary
Nature of Income
• Point Trade
1
Excepted
•
Point
2
Case I and II Trades
• Point 3
Case III Trades
• Point 4
Case
III Foreign
Dividends
• Point
5
• Point
Case
IV, V6
Chargeable Gains (as adjusted)
12.5%
25%
X


X
X



X


X
Trading v Passive Income
• Trading operation v passive income
• Revenue focus on “low substance”
• No clear definition of “trading” in TCA –
Sec 3(1)
• Case Law
• Badges of Trade
• Revenue Guidance
Court Cases
• Examine specific facts of case
• Is there an existence of common
characteristics of trade?
• Noddy Subsidiary Rights v IRC 43 TC 458
• Noddy Ltd found actively engaged in trade
of intellectual property rights
Badges of Trade
Subject Matter of Realisation
Length of period of ownership
Frequency of transaction
Commodities/Manufactured
Items normally = trading
Trading usually short
Circumstances of realisation
Similar transaction at same
time or in succession =
presumption of trading
Article more marketable?
Advertising? Marketing?
Trading v investment status?
Motive
Intention of seller
Supplementary Work
Revenue Guidance
• Tax Briefing 57
• Revenue Statement on Classification of
Activities as Trading
• Revenue prior ruling can be sought
• Foreign companies coming to Ireland
• Decisions published on “Opinions on the
Classification of Activities as Trading”
Revenue Guidance.
• Factors considered by Revenue include:
– Commercial Rationale
– Real value added
– Employees in Ireland with skills needed to
carry out trade.
Accounting Periods (AP)
• Concept of AP is fundamental to CT
• APs drive the CT compliance cycle
• Computations, Returns, Assessments,
Tax Payments
• Sec 27 CTA 97 deals with APs
• Commencement and cessation of APS
• Relationship of AP with Financial
Statements
Commencement of AP
S 27(2)(a) Co acquires a Source of
Income
Placing shareholder funds
on deposit. Date account
opened
S 27(2)(a) Co becomes Resident in Ireland
CMC changed to Ireland –
date of board meeting
S 27(2)(a) Res Co commences to carry on a
/S 27(4)
business
Dormant co gets share sub
and buys land for
manufacturing trade
S 27(2)(a) Legislative event
New liability or repeal of
exemption
S 27(2)(b) Cessation of another AP while co
remains chargeable to CT
First day of AP normally day
after AP ends
S 27(7)
Member’s passing of windingup resolution
Appt of liquidator and 12 months
intervals thereafter
Cessation of AP
S 27(3)(a)
End of 12 months from beginning of AP
S 27(3)(b)
S 27(3)(b)
S 27(3)(c)
Accounting date of company
End of a period for which no accounts prepared
Commencement of trading
S 27(3)(c)
Cessation of trading
S 27(3)(c)
Trade comes within charge to CT
S 27(3)(d)
Commencement of residence in Ireland
S 27(3)(d)
Cessation of residence in Ireland
S 27(3)(e)
Co ceases to be within charge to CT
S 27(3)(7)
Appointment of liquidator and intervals of 12 mths
Accounting Periods
• S 27(5) – Rules for cases where different
accounting dates used for different trades
• Highly unusual situation
• S27(6) – Where chargeable gains/losses
arise outside an AP
• S 27(8) – Co can appeal Revenue’s
estimate of an AP
Financial Statements to CT Comp
• FS are foundations of CT comp
• Adjustments needed to arrive at CT
liability
• CT comp determines tax charge for FS
• P/L Tax Charge and Balance Sheet
figures
Financial Statements to CT Comp
• Why is a consistent methodology
needed?
• Serves as a checklist
• Material items not omitted
• Computation prepared in correct order
• Control procedure for review
Corporation Tax Computation
1. Is Co or Branch trading? Yes (If No see
No. 8)
2. Adjust PBT to exclude
–
–
–
–
Irish divs (Principle 1)
Income chargeable under other
Cases/Schedules (Principle 2)
Chargeable Gains (Principle 4)
Tax Nothings (Principle 7)
Corporation Tax Computation
3. Prepare adjusted Case I/II comp for
each trade (Principle 2)
4. Compute CA and deduct from Case I/II
of each trade (Principle 3)
5. Is the trade taxable at 12.5%? Yes (No
see No. 8)
6. Deduct losses forward from prior years
from income of each related trade
(Principle 8)
Corporation Tax Computation
7.
8.
Aggregate the profits of each trade
Add other amounts liable @12.5% (Case III
foreign dividends @12.5% - Principle 2)
Add following amounts
-Income chargeable under Case III,IV,V
-Trading income @ 25%, net of losses fwd
Note: Includes income where No 1 and 5
answer was “No”
Corporation Tax Computation
9.
Add adjustable chargeable gains (Principle
4)
10. Deduct the following, in order, from total
profits
- Current year losses (Principle 9)
- Non trade charges (Principle 5)
- Group relief (Principle 10)
- Loss relief carried back (Principle 9)
11. Compute corporation tax @ 12.5% and 25%
Corporation Tax Computation
12. Deduct the following, in order, from
corporation tax
- Value based charges (Principle 5)
- Value based losses (Principle 9)
- Value based group relief (Principle 10)
13. Compute Close Co surcharges (Stage 3)
14. Deduct CT credits (Principle 10)
15. Add/deduct net Income Tax (Principle 7)
Corporation Tax Principles
1
Irish Divs received and divs/distributions made
2
Income Tax Principles apply to CT
3
Capital Allowances and CT
4
Chargeable Gains and CT
5
Charges on Income
6
Tax nothings – tax adjustments
7
Income tax borne by deduction
8
Losses
9
Group and Consortium Relief - Losses
10
Deduction for CT Credits
CT P1 Irish dividends
• Received
• Sch F applies to individuals but not to
companies
• S 129 TCA 97 – exemption from CT for
dividends from another Irish company and
for amounts treated as a distribution by
Chapter 2. Part 6 TCA 1997
CT P1 Irish dividends
• Paid
• S 76(5)(a)TCA 97
• Dividends and distributions are not
deductible
• S 130(2)(d)(iv) TCA 97 interest to a parent
co resident in a tax haven is a distribution
• No deduction for distributions
Irish Dividends
• S 156 TCA 1997
• Franked Investment Income (FII)
• Symmetrical treatment – div paid not
deductible and div received not taxable
CT P 2 IT Principles Apply
• Sec 76 TCA 97 – Application of IT
principles
• Co APs = IT Years of Asst
• Income exempt from IT also exempt from
CT
• Schedules C, D E and F
• Additional/modified rules for CT
GAAP v IFRS
• S 76A TCA 1997 allows IFRS or GAAP
• S 17A TCA 97 – Rules for transition from
GAAP to IFRS
• Group members may not “mix” GAAP and
IFRS for tax advantage
• S 76C(2) TCA – GAAP used for tax
purposes where groups prepare accounts
using GAAP and IFRS
Interest and R&D Capitalised
• IFRS/GAAP – certain expenses
capitalised as cost of asset in balance
sheet
• S 81(3) TCA 97 exception to general rule
• Expenses capitalised relating to R&D and
interest are tax deductible
• Amount deductible = amount capitalised
• Adjustment to CA comp and DT tax
What expenditure is deductible ?
Income Tax principles
Revenue v Capital
Pre- Trading Expenditure
Superannuation pension
Schemes
Employer Contributions to
Revenue Approved
Occupational Pension
Schemes/PRSA
Registration of Trade Marks
S 82 TCA 1997
S 84 TCA 1997
Long Term Unemployed
double deduction
S 88A TCA 1997
S 774(6)(b) TCA 97
S 787(2) TCA 1997
Paid Basis
S 86 TCA 97
What expenditure is deductible ?
Repairs to Capital Assets
Scientific Research
Research no related to cos
trade – R&D cost sharing
agreements
Know – How expenditure
S 81(2)(d) TCA 1997 Improvements and
replacements NOT
deductible
S 764 TCA 1997
S764(2) TCA 1997
S 768 TCA 1997
Non Deductible Expenditure
Amounts not “wholly and
exclusively” incurred
S81 TCA 1997
Capital employed in the trade or
profession
S 81(2)(f) TCA
1997
Interest on late payment of tax
eg VAT, CT, PAYE/PRSI
S 1080(3) TCA
1997
Expenditure involving crime
S 83A TCA 1997
Business Entertainment
S 840 TCA 1997
(Staff entertainment is allowable)
Trade Interest Paid
• Interest allowable on an accruals basis
• S 817 TCA 97 - interest paid to a connected
person if connected person is taxable on the
interest as trading income (Bank, Finance Co etc)
• Interest deduction on amount taxable on
recipient
• S 817 not applicable to interest paid to non
resident Co not under control of Irish
residents
Case III Trades
•
•
•
•
S 18 (2) Case 111(f) – Sch D Case III
S 77(5)TCA 97 applies Case I rules
Foreign Trade - Taxable @ 25%
Highly unusual for trade to be carried on
entirely outside Ireland
• Case I trading activity needed for “trading
exception” for incorporation residence rule
Case III Foreign Dividends
•
•
•
•
S 77(6) TCA 96 – deduction for foreign tax
Foreign divs taxable under Case III
S 21B TCA 97 - modifies 25% rate in S21A
ECJ Case - FII Group Litigation Order
(GLO)(C446/04)
• Freedom of Establishment principle of EC
Treaty applies
Case III Foreign Dividends
• Cannot discriminate between tax on
domestic and foreign dividends
• S 21B(5) – 12.5% rate on divs paid out of
trading profits and:
– Co res in EU/DTA country for period of div, or
– Public quoted cos (+75% sub) in Irl/EU/DTA
– Election made by Irish recipient Co
– Trade undertaken in branch of EU/DTA Co
Dividends
• ≤5% shareholding = portfolio holding
• Divs taxable at 12.5% (trade and non trade
income)
• >5% shareholding – apportionment needed
between trading and no trading income
• Where ≥ 75% profits of paying co are
trading and ≥ 75% of assets of receiving co
are trading assets
• divs treated as trading income divs
Foreign Divs Example: A Ltd
Sub
•
B Ltd
C Lt•
D Ltd
•
E Ltd
•
•
F Ltd
•
%
Owned
Point 1
100%
Point
100%2
100%3
Point
100%4
Point
Point
100%5
Point 6
Resident
Income
Rate of
tax on
div
UK
Rents in UK
25%
Jersey
Shop in French Branch
25%
France
Shop in Jersey Branch
12.5%
German
Manufacturing and Bank
interest
12.5%/25%
France
Manufacturing and Bank
interest
12.5%
G Ltd
100%
Brazil
Trade in Brazil
12.5%
H Ltd
3%
US
Rents New York
12.5%
Case IV and V
• No special rules for CT computation
• Income tax principles apply
• CT calculations done using IT rules
CT P 3 Capital Allowances
• S 307 TCA 97 – Case I CAs/Balancing
Charges are treated as an expense or
receipts of trading
• Income chargeable to CT is net of CA
• S 308(1) /(2) – CA/BC from other sources
treated as deductible/taxable from that
source
CT P 3 Capital Allowances
• Excess non-trade capital allowances
• Set against total profits of the current
period
• Carried back against total profits of prior
period
• Carried forward against same source
(Case IV/V)
CT P4 Chargeable Gains
• Income + Gains = Total Profits
• S 76(3) TCA 97
• S 21(3) TCA 97 Irish res Co not liable to
CGT – exceptions
• S 649 TCA 97 – CGT on development
land gains
• Non dev land gains chargeable to CT
• Effective rate = CGT liability
CT P4 Chargeable Gains
• S 78 TCA 97 – conversion mechanism
• Calculate capital gain/loss on each
disposal in the AP
• Arrive at chargeable gains, net of losses
• Net gain included in CT computation is an
amount, if taxed @ 12.5%, would produce
same result as CGT computation
• S 78(3)(b) TCA 97 – rules for rate
changes in AP
CT P4 Chargeable Gains
•
•
•
•
•
•
•
•
1/1/2009-7/4/2009 (97 days)
22%
8/4/2009-31/12/2009 (268 days) 25%
CGT Rate-S 78(3)(b) TCA 97:
22% x (97/365) =
5.8%
25% x (268/365) = 18.4%
CGT Rate 2009
24.2%
24.2% applies to all gains in 2009
Contrast with individuals
CT P4 Chargeable Gains
Gain on Building
€120,000
Loss on Land
(€30,000)
Net Gain
€90,000
Capital Loss b/fwd
(€10,000)
Chargeable to tax
€80,000
Include in computation
€80k x 25%/12.5%
CT @12.5%
€160,000
€20,000
CT P5 Charges on Income
• “Pure Income” receipts
• No expenses incurred in generation
income
• Patent Royalty
• Acquisition interest – on non trading loan
where loan is capable of lasting >1 year
• Annuities and other annual payments
CT P5 Charges on Income
• S 76(5)(b) TCA 97 – no deduction against
taxable income
• S 243 TCA 97 – deduction allowed in year
in which payment made
• Note – interest on funds borrowed for
trading or purchase of rental property are
not a charge on income and are
deductible under Case I/V rules
CT P5 Charges on Income
• S 243(4)-(9) define “charges” to include:
• Yearly Interest eligible for relief under S
247 (purchase of shares in another co)
• Other S247 interest
• Annuities/annual payments
• Patent Royalty expenditure
CT P5 Charges on Income
• S243 TCA 97 excludes from charges:
• Dividends and distributions
• Amounts deductible in calculating CT
Profits (CI interest, CV interest)
• Payments charged to capital
• Payments not made for valuable and
sufficient consideration
• Payment not ultimately borne by the co
Acquisition Interest
• S 247 TCA 97 – “protected” or
“acquisition” interest
• Loans taken out to invest in/lend to
another company
• Legislation is very complex
• Many anti-avoidance provisions
Acquisition Interest
1. Funds applies in acquiring ordinary
shares of, or lending to:
• Trading company
• Rental company
• Holding Co of trading company
• Wholly or mainly test
Acquisition Interest
2. Refinancing loans qualify to extent of
the amount of original loan
3. Investing company must hold >5%
interest after S 247 transaction
4. ≥ 1 common director throughout loan
5. S 254 Recovery of Capital provisions
-
Sale of shares and repayment of loan
Receipt of divs/income allowed
Annuities/Annual Payments
• Two categories:
• Relevant trade charges – paid wholly and
exclusively for 12.5% taxed trading
purposes
• Non-trade charges
Relevant Trade Charges
• Patent Royalties and Annual Payments
• S 243(3) TCA 97 -Pre-trading trading
charges treated as paid on date trade
commences
• S 243A(3)TCA – trade charges deductible
against
– Income from trades @ 12.5%
– S 21B Dividends taxable @ 12.5%
– Trading income from reinsurance
Relevant Trade Charges
• S 243B TCA 97 – relief for “Value Based
Relief”
• Tax value of trading charges exceeding
12.5% trading income reduces CT payable
• No deduction for trading charges against
25% income
• Excess charge value = 12.5% tax equivalent
• Unutilised charges carried fwd as S396 trade
losses
Relevant Trade Charges
• S 243B(1) TCA 97 – CT that can be reduced
is “relevant corporation tax”
• CT @25% and CT on chargeable gains can
be reduced
• Reduce CT liability before
– S 239/241 – income tax deducted
– S 396B value based loss relief
– S 420B value based group relief
– S 440/441 close co surcharges
Trading Charges
Profit per Accounts €52,000
• Point 1
Add back Patent
€20,000
• Point 2
Royalties*
• Point 3
€72,000
• Point 4
Less Deposit Interest (€48,000)
• Point 5
Case
I Income
€24,000
• Point
6
*Charged
in Accounts
Trading Charges
Income
@25%
@12.5%
• Point 1
Relevant
(max)
• PointCharges
2
• Point 3Tax
Corporation
•
Point
4
Value Based Relief
Point 5
CT•Payable
• Point 6
(€40,000-€24,000)
* 12.5% =
€48,000
€24,000
(€24,000)
€12,000
(€2,000)*
€10,000
€16,000
Utilisation of Charges- €40,000-€24,000-€16,000=€0 fwd
Non Relevant Charges
• Charges not wholly and exclusively
incurred for trade purposes
• Patent Royalties for Case IV source
• Patent Royalties paid for 25% tax mining
trade
• S 247 acquisition interest
Non Relevant Charges
• S 243(2)TCA 97 – deductible against total
profits
• Deduct after all other reliefs but before
group loss relief
• Choice- against 12.5% or 25% items
• Gains are grossed up @12.5%
• Excess non-trade charges lost if not
claimed by co or group co
CT P 6 “Tax Nothings”
• Valid debits/credits in Financial
Statements
• Not deductible or taxable for CT purposes
• PBT must be adjusted
• Add back or deduct items
• No deferred tax if “permanent differences”
CT P 6 “Tax Nothings”
Debits in P&L not
deductible for tax
Entertainment
Expenses
Impairment Provisions
Credits in P&L not taxable
Dividends from Irish
companies
Profits from Fair Value adj in
non trading Co
Loss on liabilities in non Profits on liabilities in non
trading Co
trading Co
Divs and payments
treated as divs
CT P7 Income Tax at source
• Withholding tax applies to wide range of
transactions
• Receipts – tax computation
• S 24(2) TCA 97 – IT deducted set off
against CT for the AP in which income is
assessable
• IT refundable only if no CT for AP
• Accounting treatment = tax treatment
CT P7 Income Tax at source
Liable to Income Tax @ source Exceptions for annual
Interest paid
DIRT Interest @ 25%
S 246(3)(a) Bank/building
S265 exemption
soc interest
Professional Services PSWT
S 246(3)(h) DTA resident if
S523
exemption
S264(2) annual interest (non
S 246(3)(g) Interest treated
bank) Withholding tax @ 20%
as a dis under S 437
S 268 Charges - Patent
S 246(3)(bb) and S 246(5)
Royalties/annuities/annual
Interest treated as trading
payment Withholding tax @ 20% eg Treasury SPC
CT P7 Income Tax at source
•
•
•
•
•
•
•
•
Treatment of payment in CT computation
S 246(2) annual interest
S238 patent royalties, annuities, annuities
S 239 Rules for resident Co to pay Inc Tax
S241 Rules for non resident Co
CT Tax Return to show details
Option to net off S 239(7)
Inc Tax treated as CT for payment
Groups - Payments
• S 410 TCA 97
• 51% Group
• Direct or indirect
ownership
• S 9(5) –(10) TCA 97
• Rules to calculate
lower tier companies
51%
Owner
51%
Payer Recipient
Group -Payments
• S 410(3) TCA 97 – 51% group conditions
• Both companies Irish resident or resident
in EU/EEA with DTA (Iceland and Norway)
• Where ownership is indirect all companies
in chain must be resident in EU, Iceland
or Norway
• Indirect ownership – shares in lower co ≠
share dealing co
Consortium -Payments
• *Other Shareholders
• HC must own 90%
Trading Co
• ≥75% shares in
HC/TC owned by ≤ 5
EEA Res Cos
Each holds ≥ 5%
Up to 5 consortium
Members
25%*
75%
Holding Co
90%
Trading Co
Group -Payments
• S 410(4) TCA 97 – no need to deduct Inc
Tax on payments within group/consortium
regime that are:
• Charges on income of interest of paying co
• And taxable in country of residence where
non resident recipient is resident
• Recipient co cannot hold shares as trading
stock
• S 891 TCA 97 – Returns to Revenue
CT P8 Losses
•
•
•
•
•
Chapter 3 Part 12 TCA 1997
S 396-S401TCA 1997
Trading Losses
Other Losses
Stage 3
CT P8 Losses
Case IV/V - S 399
• Case IV – no claim, mandatory
• Case V – make a claim
• Apportionment needed if prior AP not =
length of current AP
• S 384 TCA 97 CV losses set against
profits of first year
• CA (S305(1)(a) claimed in priority to loss
fwd
CT P8 Losses
Case IV Losses
Priority
1. Sideways against
other Case IV
2. Forward against
future Case IV
Case IV Excess CA
priority
1. Offset against total profits
of current period
2. Carry back to offset total
profits of prior period
3. Carry forward against
future Case IV
CT P8 Losses
Case V Losses
Priority
Case V Excess CA
priority
1. Calculate net loss
2. Carry back against Case
V of prior period*
3. Forward against first
future Case V – after
Case V CA claim
4. Cannot be group
relieved
1. Offset total profits
current period
2. Carry back against total
profits of prior period
3. Carry fwd against future
Case V
4. Can be group relieved
* 2 year time limit; equal length
CT P 8 Trading Losses
• Categorise 12.5% trading losses and
other
• 12.5% trading losses = “relevant trading
losses”
• 25% Losses include land dealing,
minerals or petroleum exploration
Relevant Trading Losses
• S 396A(3) TCA 97 -Order of set off
• First against other 12.5% trading income
of AP, foreign divs @12.5%, income from
certain financial trades @12.5%
• Second against income of prior year of
equal length from 12.5% trade or 12.5%
financial trades
Relevant Trading Losses
• No carry back against foreign divs @12.5%
• Time limit – within 2 years of end of AP in
which loss incurred
• Apportionment of AP of prior AP longer than
AP of loss
• S 396A(4) – if AP of prior year is shorter, full
loss allowed and any balance claimed in
second last period – apportionment for
remaining period
Relevant Trading Losses
• S 396A(4) TCA 97 timing of claims
• Prior period income first reduced by trading
losses fwd before setting off relevant trading
losses carried back
• S 396A(3) TCA –relevant trading losses
offset first against income of current AP and
excess then carried back to prior AP
• Relief under S 396A (current or future AP but
not group relief) comes before deduction of
current S 243A charges
Trading Losses Example
A Ltd Trading Company
2010 Financial Statements
Profit/Loss before Tax
(€80,000)
Deposit Interest
€16,000
2009 Tax Computation
Case I
€100,000
Case III
€20,000
Trading Losses Example
2010 CT Comp
Loss per A/Cs
(€80,000)
Deposit Interest
€16,000
Case I Loss
(€96,000)
Carry back of loss to 2009
Case I
€100,000
Loss carried back against 12.5%
CT payable for 2009 reduced to
(€4,000 x 12.5%)+(€20,000 x 25%)
(€96,000)
€4,000
Value Basis Relevant Trading Losses
• S396B TCA 97
• Applies to losses that cannot be relieved
against 12.5% income under S396A
• Euro for euro loss relief takes precedence
over value based relief
• Reduction of tax payable
• CT on 25% income and CT on gains
Relevant Corporation Tax
• Value based relief reduces “relevant
corporation tax” = CT liability before
– S 239 and 241 income tax deducted
– Value before group relief
– Close co surcharges
• Allowed in year of loss and carried back to
prior AP of equal length
• Time limit – claim within 2 years of AP of
loss
Non Trade Charges/Mgt Expenses
• Mix of non-trade charges/Mgt expenses
and losses?
• Deemed use of losses
• Carry forward amount reduced
Non Trade Charges/Mgt Expenses
•
•
•
•
•
•
•
•
A Ltd Solution p. 567 - Loss Utilisation
Case I Loss
€160,000
Actual loss used VB
(€2,500/12.5%)
(€20,000)
Deemed loss used non trade charges
(€40,000*25%/12.5%) (€80,000)
Balance loss fwd
€160k-€20k-€80k
€60,000
Relevant Trading Losses
• Carry forward of unrelieved trading losses
• S 396(1) TCA 97
• Losses c/fwd indefinitely against same
trade
• Must be set against first available income
from the same trade
• No claim needed
Excepted Trade Losses
• 25% trade
• Land dealing/mineral/petroleum activities
• S 396(2) TCA 97 current and prior years
1.Against profits of current AP
2.Against profits of prior year*
3.Carry forward against future income of
same excepted trade
* Equal length rules and 2 year time limit
Terminal Loss Relief
• S 397 TCA 97
• Termination of trade with loss in final 12
months trading
• Carry back of loss against previous profits
from the same trade for 3 years
• Time apportionment for “mismatching”
APs
Terminal Loss Relief.
• S 397(3) TCA 97 - Relief for losses fwd
and trade charge take precedence over
TLR
• TLR not allowed to extent loss could be
claimed in another way
• TLR that is relevant trading loss can be
offset against 25% income
• Example p.573.
CT P 9 Group & Consortium Losses
• Chapter 5 Part 12 TCA 97
• Losses and Charges for 75 Group or
consortium
• Rules for group losses ≠ Rules for group
payments
CT P 9 Group & Consortium Losses
• S 411(1)(a) TCA 97
• “…one company is the 75% subsidiary of
the other or both are 75% subsidiaries of
a third company”
• S 9 TCA 97 – direct or indirect ownership
≥ 75%
75% Groups
• S 411(1)(c) TCA 97
• Is the co a subsidiary of another? Ignore
share capital the other co holds
– Directly/indirectly in non res EU/EEA DTA
country
– Directly in a co where shares held as trading
stock
– Indirectly if shares held as trading stock by
direct shareholder
75% Groups
• Parent must have beneficial entitlement to
≥ 75% of profits available for distribution
to equity holders S 412(1)(a)
• Parent must have beneficial entitlement to
≥ 75% of assets available for distribution
to equity holders on a winding up S
412(1)(b)
Consortium Relief
• Consortium ownership must be directly in
a trading company which is not a 75% sub
of another company
Or
• Consortium ownership is directly in a 75%
owned holding co, which holds a
dir/indirect 90% owned trading sub and
sub is not 75% sub of any co (other than
HC)
Group Relief -Mechanism
• Loss Relief for trading losses and other
payments
• Excess trade and non trade charges
• Excess Case V capital allowances
• Excess Management expenses
• Resident and non resident companies
• “Surrendering Co” and “Claimant Co”
Group Relief -Mechanism
• ECJ Marks & Spencer 2006 STC 237
• Group Relief extended to losses outside
Ireland
• Conditions in S 420C TCA 97 must be
satisfied
• Losses in EEA sub can be surrendered to
Irish parent co
• Upward surrender only
Group Relief -Mechanism
• S 411(4) TCA 97 – losses only available
once
• Losses can be surrendered to more than
one claimant co
• S 411(5) -Payment can be made for
losses up to the amount of the loss- no
tax consequences
• Restriction on losses if CT Return filed
late
Group Losses
• Group Relief and 12.5%/25% Rates
1.S 420A -Losses and trade charges on
12.5% income – offset against profits of
group cos liable @ 12.5%
2.S 420B -Tax Value of losses at 1. against
CT of other group Cos on Value Basis
3.S 420- Losses in 25% trades/non trade
charges/Mgt Exp/ Excess Case V CA offset
against total profits of group Cos
12.5% Trade Losses
• S 420A TCA 97 – relevant trade loss of
surrendering co + relevant charges may
be surrendered and offset against
claimant cos in current year
– Relevant trading income
– Foreign divs taxed @12.5%
– Financial services trades- non life insurance,
reinsurance, life business attributable to s/h
12.5% Trade Losses
• Group Relief deducted before TLR and
after loss relief brought forward
• Group relief utilises 12.5% losses against
12.5% profits
• Claimant claims group relief under S
420A(3) after
– Cos own 396A loss relief and
– Deduction under S 243A for relevant trade
charges
Group Losses 12.5% Trades
• Co A
• Group Relief
Case I Loss (€75,000)
Co B
• Co B
Case I Profit €50,000
Case I Profit €50,000 S 420A
Case III
€15,000 Group Relief
(€50,000)
Case III
€15,000
CT @ 25%
€3,750
Group Relief- Value Based
• S420 TCA 97 – unrelieved relevant
trading losses + relevant trade charges
• Convert to tax value @12.5%
• Claimant co can reduce CT by tax value
• CT before IT on payments made/received
and close co surcharges
Group Relief- Value Based
• S 420B(4)(b)(ii) TCA 97
• Any balance of losses in surrendering co
= total losses-(VB Group relief/12.5%)
• Effect of VB Group relief is to convert
12.5% losses in the surrendering co into a
tax value and to transfer this value to a
claimant company
Group Relief- Value Based
• S 420B(4)(b)(ii) TCA 97
• Any balance of losses in surrendering co
= total losses-(VB Group relief/12.5%)
• Effect of VB Group relief is to convert
12.5% losses in the surrendering co into a
tax value and to transfer this value to a
claimant company
Group Relief Example
Company A
Case I Loss
(€120,000)
Company B
Case I Profit
€50,000
Case III
€8,000
Group Relief Example
Group Relief Computations
Co B Case I Profit
€50,000
S 420A Group Relief
(€50,000)
Co B Case III
€8,000
CT @ 25%
€2,000
VB Group Relief
(€2,000)
S420B - €16,000*12.5%
CT Payable
NIL
Group Relief Example
Utilisation of Losses
Co A Losses
Used S 420A by B Case I
(€120,000)
€50,000
(€70,000)
Used S 420A VB by B Case III
€16,000
Balance Losses
S 420B(4)(b)(ii) TCA 97
(€54,000)
Other Losses-Groups
• S 420(1) TCA 97
• S 420(6) TCA 97
• S 420(3) TCA 9
• S 420(2) TCA 97
• Losses in 25% trades
(exc Case III trades)
• Non trade charges
not relieved in AP
• Excess Mgt Exps of
Inv Co
• Excess CV Cas
• All of these can be
surrendered against
claimant cos Profits
Group Relief – Other Losses
• Losses with potential 25% tax value are
offset against income or gains in claimant
company with
– 25% trades or 25% income. Case III, IV, V
– 12.5% trades, for divs and chargeable gains
Possible mismatch between tax value
foregone by surrendering co and tax benefit
received by claimant co
Group Relief – Order
• S 420 Group Relief reduces profits before
loss relief carried back from later AP
• (S 308(4), 396(2), 397 TCA 1997)
• S 420 Group Relief claimed after all other
reliefs eg current losses and losses
forward
• S396(2) and 396(1) TCA 1997
Corresponding APs
• APs of surrendering and claimant
companies may not correspond
• S 422 TCA 97 – partial group relief where
APs overlapping
• Losses/profits apportionment where APs
not coterminous
Corresponding APs
• Group relief is lower of
• Loss x A
or Profit x A
B
C
A = Period common to both companies
B = Length of AP of surrendering company
C = Length of corresponding AP of claimant
company
Diagram
Apportioned Loss
referable to this
period
AP of surrendering Co
AP of Claimant Co
Apportioned Profits
referable to this period
Common APs
1. Time apportion loss to arrive at amount
applicable to the common AP
2. Time apportion the profits to arrive at
the amount applicable to the common
AP
3. Claim the lesser of 1 and 2
Example p 584
• 2010 Co B claim
• Lesser of 3/12ths of
As 2010 loss or
3/12ths of Bs 2010
profit
• 2011 Co B claim
• Lesser of 9/12ths of
As 2010 loss or
9/12ths of 2011profit
• €104k x 3/12 = €48k
• €48k x 3/12 = €12k
• €104k x 9/12 = €78k
• €48k x 9/12 = €45k
S 396(1) A loss forward
is €104k-€12k-€57k =
€47k
Group Relief Losses
Surrender of Relevant Losses
S420A TCA 1997
Group relief by surrender to
group companies with trading
profits @ 12.5%
S 420B TCA 1997
Value based group relief by
surrender to group companies
with non trading income
@25% or c gains (grossed up)
Group Relief Losses
Surrender of Excess non trade charges
S420 TCA 1997
Group relief by surrender to
group companies with non
trading income @ 25%/12.5%
or chargeable gains
• S 429 TCA 97 - Group Relief must be
claimed within 2 years of surrendering cos
AP with its consent
Consortium Relief for Losses.
• S 420(8) and 420B(5) TCA 1997
• Consortium Relief losses are reduced by
reference to ownership
• 25% consortium claimant company claims
only 25% of surrendering company’s loss
• Group relief company owning <100% can
claim 100% if all conditions for relief met.
CT P10: Deduction for CT Credits
•
•
•
•
Credit is deducted from CT liability after
Applying 12.5% and
Applying CT Principles 1-9
R&D is the only form of CT tax credit
Research and Development
• Tax credit of 25%
• Credit available for qualifying capital
(buildings) and revenue expenditure
• Credit on incremental spending over 2003
spend (credit effectively on a volume basis
for new taxpayers)
• Excess credits may be refunded and/or
carried forward indefinitely
Research and Development
• Who can claim?
– Companies within charge to Irish CT, Branches
of overseas companies included
• Where must R&D be carried out?
– R&D activities carried on within EEA
– R&D cannot be tax deductible in another
country
• Co does not have to hold the intellectual
property rights
R& D
•
•
•
•
•
S 766(1) – “qualifying activities”
Basic Research
Applied Research
Experimental Development
Activities in the fields of
– Natural sciences
– Engineering and technology
– Medical or agricultural sciences
R&D
• SI No 434/2004 and Revenue Guidelines
• Expanded list of areas and exclusions
• Activities must aim to:
– Advance scientific or technical knowledge,
and
– Resolve scientific or technological uncertainty
R&D
• Commercialism of technology or
investigations on commercial viability of
an idea ≠ R&D
• Once scientific or technological
uncertainty is resolved, expenditure
beyond that point does not qualify
R&D
• Exclusions:
–Expenditure financed by grants
–Tax exempt royalties
–Royalties in excess of arm’s length rate
–Interest
R&D
Example: X Ltd
Qualifying R&D of €40,000
Sales
€100,000
R&D Expenses
(€40,000)
Taxable Profits
€60,000
CT @ 12.5%
€7,500
Credit for R&D
€40,000 @ 25%
CT Liability
(€10,000)
Excess R&D Credit
NIL
€2,500
R&D
Plant & machinery:
• 100% claim for expenditure on R&D plant
and machinery purchased in period as
part of incremental expenditure
• Capital allowances on same capital items
also allowed
R&D
• Subcontracting can mean no R&D credit
• R&D credit allowed where the
subcontractor is:
– A university or 3rd level institution in EEA. Up
to 5% of Co’s qualifying R&D
– Others – up to 10% of Co’s qualifying R&D
– Subcontractor cannot claim R&D on same
expenditure
Incremental Expenditure
•
•
•
•
•
Companies formed before 2003
Base year = AP ending in 2003
Identify qualifying R&D in 2003 base year
Identify qualifying R&D in current AP
If current year > 2003  excess available
for R&D credit
• Companies formed after 2003 – all R&D
incremental
Calculation of R&D Credit
•
•
•
•
•
Current Rate 25% (20% up to 2008)
S 766(2) TCA 97
Credit first set against current period’s CT
S766(4A) TCA 97
Unused excess set back to offset CT of
preceding period of equal length
• Excess still left after setting back can be
claimed for Revenue refund
Calculation of R&D Credit
•
•
•
•
•
Current Rate 25% (20% up to 2008)
S 766(2) TCA 97
Credit first set against current period’s CT
S766(4A) TCA 97
Unused excess set back to offset CT of
preceding period of equal length
• Excess still left after setting back can be
claimed for Revenue refund
Calculation of R&D Credit
• Refund of excess R&D Credit repaid in 3
installments over 33 month period from end
of AP in which expenditure incurred
• First installment is 33% of excess – payable
by filing date of AP of expenditure
• Remaining balance used to
– Reduce CT of next AP
– 50% of any remaining excess repaid after due
date for filing of next CT Return after original
claim CT Return
Calculation of R&D Credit
• Claim for R&D credit made in respect of AP
31st December 2009
• 50% refunded after filing of 31st December
2010 return
• Filing date for 2010 Return is 21st
September 2011
• Refund made after 21st September 2011
Calculation of R&D Credit
• Further excess reduces CT of following
AP
• S 766(4B) TCA 97 - remaining excess
paid as 3rd installment after filling of 2nd
CT Return after CT Return giving rise to
original R&D claim
Maximum Credit
• S 766B
• Maximum amounts that can be paid to co
is greater of:
– CT payable in 10 years prior to AP of claim, or
– Payroll liabilities (PAYE/PRSI/Levies) for AP in
which R&D incurred
• Payroll costs usually dominant R&D
Expenditure on Buildings
• S 766A
• R&D credit for 25% of 100% cost of
certain buildings
• Building must qualify for IBAA
• No base year or incremental expenditure
 all expenditure qualifies excluding site
cost and grants
Expenditure on Buildings
• 35% of building must be used for R&D
activities carried out in EU/EEA country in
a 4 year period S 766A(1)(a) TCA 97
• 4 year period starts when building bought
or refurbished
• Clawback provisions S 766(B)(3)
• Case IV assessment if building ceased to
be used/sold within 10 years or ceases to
be used for same trade within 4 years
R&D Groups
• Groups = 51% relationship
• Aggregate expenditure in group compared
to base year
• Joint election to Revenue to select co
claiming R&D credit
• If no election, expenditure allocated
between group members on basis of co
expenditure to group spend
R&D Centres
•
•
•
•
•
•
FA 2010 – improvements to R&D
APs commencing after 1 January 2010
S 766(7C) TCA 97
Groups with R&D centres ≥ 20km apart
One centre ceases to be used for R&D
That centre is excluded from 2003 base
year expenditure
R&D Centres
•
•
•
•
What is the benefit of FA 2010?
Companies with R&D in Ireland from 2003
High levels of 2003 base year spend
Removing 2003 expenditure in one R&D
centre can increase access to R&D
credits
R&D Expenditure
• R&D centres in Galway,
Cork and Limerick
• Base year R&D 2003
spend Galway €100k;
Cork €20k
• Limerick set up 2004
• Galway shut down 2010
R&D spend in other 2
centres €100k each
• Pre FA 2010
• R&D credit = (€200k€100k-€20)k = €80k
• Post FA 2010
• R&D credit = €180k
• (€200k-€20k)
• Galway 2003 spend of
€100k disregarded
• Claim for €180k in
2010
R&D Centres Clawback
• R&D activities for 4 years prior to centre
shutdown are taken over by group co
• R&D centre closed down is used for
trading purposes by group co
• All group cos cease to trade within 10
years of shutdown of centre
• Clawback – Sch D Case IV on R&D co
using centre of last co in charge to CT
R&D Administration.
• S 766(5) claim within 12 mths of end of AP
• S 766(1)(b)(vi) claim for pre trading
expenditure – within 12 mths of end of AP
when trading commences
• Records for R&D must be maintained
• S766(7) and (8) – Revenue may consult
with outside experts
• Co may object and appeal against choice of
expert.
CT Compliance Process
• Part 41 TCA 97 – Self assessment
• S 951(1)(b) – requirement to file Form
CT1
• S 844 – specifies the data to be provided
CT Compliance Process
Profits chargeable to CT Income - Cases and Schedules
Chargeable gains and allowable
losses
Charges exempt from IT
Distributions from Irish resident companies
Annual payments on which IT deducted S 238 TCA 97
IT on loans to participators S 438 TCA 97
Chargeable gains rolled over under reorg reliefs S 584 TCA 97
Income tax deducted from company’s income
Mgt expenses, capital allowances and balancing charges
CT Filing and Tax Return
• S 917G – “approved person” -ROS
• Electronic filing – “authorised person”
• S 951(5) TCA 97 – tax return filed by tax
advisor treated as filed by the company
• Risk Management – tax consultant should
get written approval of client before Tax
Return is submitted
Expression of Doubt
• S 955(4) TCA 97
• Where taxpayer has doubt about
application of law or tax treatment of item
• Disclose uncertainty on Tax Return
• Full and true disclosure – protects against
penalties
• Genuine doubt not motivated by tax
avoidance or evasion
Due date for Filing CT 1
• Manual Tax Return – 9 mths after end of
AP
• No later than 21st of month in AP in which
9 mth period ends
• Liquidation of co – any return due >3 mths
after liquidation commences is due at the
end of 3 mths or on 21st of 3rd month
Due date for Filing CT 1
• A Ltd
• AP 31st December
2010
• Manual CT Return
filed
• BA Ltd
• AP 3rd January 2011
• Manual CT Return
filed
• CT1 due 21st
September 2011
• CT1 due 3rd October
2011
Due date for Filing CT 1
• Electronic Tax Return – 9 mths after end
of AP (ROS)
• No later than 23rd of month in AP in which
9 mth period ends
• Liquidation of co – any return due >3 mths
after liquidation commences is due at the
end of 3 mths or on 23rd of 3rd month
Late Filing
• S 1084 TCA 97 – late filing surcharge
• 5% of tax – max €12,695 – Returns filed
within 2 months of deadline
• 10% of tax – max €63,485 – Returns filed
more than 2 months late
• S1085 TCA 97 – restrictions on loss relief
Loss Restrictions
Loss Relief provision
S 308(4) Excess Case IV or V
CA
S 396(2) Current and C/Back
excepted trade
S396A(3) Current and C/Back
relevant trade
S 396B(2) Relevant trade VB
Current and C/Back
S399(2) Case V C/Back and Fwd
Return ≤ 2
mths late
25%
Return > 2
mths late
50%
25%
50%
25%
50%
25%
50%
25%
50%
Loss Restrictions
Loss Relief provision
S 411 Group Relief
S 420 G Relief – Excepted Trade,
Esc Case IV/V CA, Excess Mgt
Xps/non trade charges
S 420A(3) G Relief rel trading losses
and excess trade charges
S420B(2) G Relief VB rel trading
losses and excess trade charges
S1085 Max Restriction
Return ≤ 2 Return > 2
mths late mths late
25%
50%
25%
50%
25%
50%
25%
50%
€31,740
€158,715
CT Assessments
• S 954 TCA 97
• Inspector makes assessment after CT1
filed
• If CT1 is late – assessment is issued
• Assessment based on CT1
• Check that assessment reflects data on
CT1
CT Assessments
• Taxpayer may request an assessment
• Useful to show entitlement to tax credits
for Irish tax by non resident shareholder
• S 955 TCA 97 – 4 year time limit for
Inspector to amend assessment
• Within 4 years after chargeable period in
which CT1 due for filing
CT Assessments
• 4 Year time limit does not apply where
• Full and True disclosure not made
• Appeal determined by Courts or Appeal
Commissioners
• Event occurs after filing of CT1
• Error in calculation
• Mistake of fact – asst does not reflect fact
disclosed
• S 955(3) Right to appeal
Payments - CT Start Up Exemption
• S 486C TCA 97 – 3 year exemption
• Company incorporated on or after 14th
October 2008
• Commence a new trade in 2009 or 2010
• Income taxable @ 12.5%
• Trade not carried on previously
• Cannot be liable to close co service surcharge
CT Start Up Exemption
• Full exemption if CT on income and gains
≤ €40,000
• Marginal relief where CT between
€40,000-€60,000
• Profits or adjusted chargeable gains up to
€320,000 fully relieved
CT Payments
• S 958 TCA 97 – corporation tax payments
• Extremely complex due to amendments
• New small companies – total liability of
€200,000 or less in year 1
• No Preliminary Tax due
• CT liability payable on CT 1 filing date
Small Companies
• CT liability in previous AP of ≤ €200,000
• Due dates for tax follow same rules as CT
Returns
• Preliminary Tax Due: 21st(23rd) day of
month 11 of AP
• Balance of Tax Due: 21st (23rd) day of
month 9 after accounting period
• PT must be lower of 90% of current
period and 100% of prior period
Large Companies
• CT liability in previous AP of > €200,000
• Due dates for tax follow same rules as CT
Returns
• 1st installment Preliminary Tax Due:
month 6 of AP
• 2nd installment Preliminary Tax Due:
month 11 of AP
• Balance of Tax Due: month 9 after
accounting period
Large Companies
• Level of payment required
• PT 1st Installment: Lower of 45% of
current period liability and 50% of liability
of prior year
• PT 2nd Installment: Amount to bring total
payment to 90% of current year liability
• Balance of liability due on CT1 filing date
PT Example
X Ltd Year Ended 31/12
Current Year CT
€350
Prior Year
CT €300
PT1 Lower of
€350*45% = €157.5k
€300*50% = €150k
Paid
€150k
Due Date
21st June
PT2
€350*90% = €315k
Payable
€315k-€150k
=€165k
Due Date
21st
November
Balance = €350k-150k€165k
€35k
21/9 CT1
Filing Date
CT and Short APs
• APs shorter than 1 mth +1 day – due date
for PT is last day of the period or 21st of
month if period ends between 21st day
and end of the month
• AP of large co longer than above, but
shorter than 7 mths, small co rules apply
• One PT payment in month 11
Failure to pay Correct Amt
• S 958(4) TCA 97 – interest on
underpayment from due date
• Risk management as penalty for wrong
payment is disproportionate to quantum of
error
• Prior Year CT €100 and Current Year CT
= €1m
• If €100 paid after 21st/23rd of 11th mth 
Interest on €900k from due date
Group Companies – Offset PT
• S 958(11) TCA 97
• Group co which is not a “small co”
• If PT<90% a group co can surrender any
excess>90% PT
• Cos must have same APs
• Joint election to Collector General on or
before filing date
• Claimant co must pay all liability by filing
date
Other Returns to File
• S 889 TCA - Form 46G (by the end of the
CT1 filing month)
• Payments for services >€6,000 where no
tax deducted, detail needed of name,
PPSN, Address and nature of services
provided
• S 891 TCA 97 – Return of interest paid
gross
CT and Accounting for Tax Skills
• GAAP or IFRS
1.Prepare CT comp
2.Prepare DT comp and related A/C entries
3.Reconcile actual tax to expected tax
CT and Accounting for Tax Skills
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•
•
•
•
P1:
P2:
P5:
P8:
P9:
Irish divs/dist received/payable
IT principles
Charges on income
Losses
Group Relief & Consortium Relief
for losses
Professional Skills for CT
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•
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•
Research Skills and Risk management
What are the sources of research for CT?
Engagement of 3rd parties
Firm’s RM procedures
Shareholder and director details
SEC and other restrictions
Group structure
Professional Skills for CT
•
•
•
•
•
Close Company Issues
Year end and length of AP
Cos sources of income and CT rates
Changes in ownership
Effect on residence
Report Writing/Communication
•
•
•
•
Writing style appropriate to reader
Build rapport
Aim to be main contact person for client
Are you communicating with person who
has required authority
Professional Obligations/Ethics
• Have you followed Standard of
Professional Conduct?
• Check for conflict of interest in Code of
Ethics
• Is your practice over reliant on one client?
Money Laundering
• When were the last checks carried out?
• Is an up to date co search needed?
• Was there a change in ownership since
last ML checks done?
• Have you checked current ML law and
CCABI Guidelines?
• Consult CAI website on ML
Professional Skills and CT
• Do not rely on familiarity with client
• Example of query on sale of London office
block
• Always use Tax legislation and check
basics
• S 23A TCA was not consulted
• Incorrect advice may have been given
CT Round Up
• Company Residence
• Incorporation Rule and Case Law
• Trading and Treaty exceptions to
incorporation rule
• Irish resident companies liable on
worldwide income
• Non Resident Cos liable on trading
branches
CT Round Up
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•
•
•
•
•
Calculation of Corporation Tax
CT Rates
Trading v Passive Income
Case Law and Badges of Trade
Revenue Guidance on trading v passive
Accounting Periods – drive the CT
compliance process
CT Round Up
•
•
•
•
•
•
•
•
From FS to CT comp
Steps in preparation of CT comp
10 CT Principles
GAAP/IFRS
Foreign Trades
Foreign dividends and 12.5% rate
Capital Allowances
Chargeable Gains
CT Round Up
•
•
•
•
•
Losses
Value based relief
Charges
Offset Rules for losses
Group and consortium relief
CT Round Up
•
•
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Research & Development
CT Compliance Process
Tax Filing deadlines
Tax payment dates
Small and large companies
Start Up Exemption
Accounting for Tax Skills
DT and tax reconciliation
CT Round Up
•
•
•
•
Professional Skills for CT
Report writing and communication
Professional Obligations/Ethical Values
Money Laundering
Learning Outcome
•
•
•
•
•
•
Scope of charge to CT
Apply correct CT rate
Commencement and cessation of AP
Treatment of dividends
CT Rate for foreign dividends
CGT rebasing for CT comp
Learning Outcome
• Relevant and non relevant trade charges
deductions
• Understand tax treatment of group
payments
• Losses on € for € and Value basis claims
• Claim Loss Relief for groups and
companies
Learning Outcome
• Identify and calculate R&D Credit
• Advise on compliance issues and
obligations for companies
• Apply accounting for tax principles to CT
principles
• Use professional skills for CT
engagements