The system of preliminary tax, tax returns and assessments for companies is broadly similar to that for individuals. An initial return is also required upon commencement to trade. Companies must self assess their tax liabilities.
If they have any income profit or gains potentially within the scope of tax in that period, they must make a return. Companies must pay preliminary tax and make a self-assessed tax return in respect of their income. Accounts and computations must also be filed.
Under the self-assessment system the taxpayer must make the return of its own initiative. In some cases, Revenue may also give notice to make the return but this is not a precondition to the obligation to make the return. It is possible for Revenue to agree or give notice that a return is not required. This may arise, for example, in relation to management companies holding the common areas of properties.
Companies have a certain element of freedom in setting their tax year, because the tax year is determined by their accounting period. Unlike the case with individuals, the accounting period determines the period for liability for non-trading profits.
The payment date for corporation tax was brought forward for larger companies in 2008. A large company is one with tax liability of more than €200,000 in the previous accounting period.
For accounting periods commencing after October 2008 taxes are due in three installments:
- 50% liability of the preceding period or 45% of the current period within five months and 21 days;
- Balance to bring up to 90% of current year liability within 10 months and 21 days of the commencement of the accounting period;
- Final return and balance eight months and 21 days after accounting period ends.
The requirement for payment during the period can lead to difficulties of estimation of calculation.
The corporation tax return asks multiple questions of relevance to tax liability. A full and accurate return is required with disclosure of all material facts relevant to tax liability. If there are errors not due to negligence recklessness or knowing falsity, an amended return may be made as soon as the error becomes apparent. This can be generally done within four years. Additional liabilities if any must be paid. Interest and in some cases penalties will apply.
It is possible to note an expression of doubt in relation to the treatment of a particular matter. This will generally be sufficient to avoid interest and penalties if the taxpayer’s view is wrong provided that the expression is genuine all relevant facts and circumstances are disclosed, appropriate investigation is made into these particular circumstances including all published guidelines and relevant supporting documents are filed.
Companies other than small companies for company law purposes who meet certain criteria are obliged to file financial statements in a particular electronic format. This is iXBRL. To be a small company the turnover must be less than €8.8M, aggregate assets less than €4.4M and average employees less than 50.
Third Party Returns
In addition to the corporation tax return, third-party returns are required with it. It requires returns of payments for services to third parties in connection with the business where the amount of the payment exceeds €6000 in the year. There are certain exclusions, including for cases where taxes are withheld. The details include the name and address of the payeem the amounts paid (exclusive of VAT), the nature of services and thier tax number.
Certain entities such as agents and nominees have greater obligations to disclose payments to third parties. In some circumstances, there are obligations to deduct and pay over tax on behalf of the third parties concerned
Companies must pay preliminary tax by the 21st(23rd via ROS) day of the month before end of the accounting period. This is a payment on account of the current year’s tax. It will be a credit towards payment of the corporation tax return which is required eight months and three weeks before the end of the accounting period.
If the payment is not made in the correct amount interest applies. There is a low rate of interest on overpayments.
The requirement is to pay at least 90% of the current year’s corporation tax liability or at least 100% of the prior year’s corporation tax liability. If it is not paid interest runs on the shortfall.
Companies whose liability exceeds €200,000 must pay two instalments. This initial instalment must be paid by the 21st (23rd via ROS) day of the sixth-month The amount due is the lower of half of the previous year corporation tax liability or 45% of the current year’s liabilities. The other instalment is due by the 21st (23rd via ROS) day of the last month of the accounting period. It must bring the total to 90% of the current period liability.
The corporation tax return must be made within 8 month and three weeks of the end of the accounting period. Use of revenue online (ROS) is now mandatory.
The corporation tax return and the remaining 10% of liability must be paid by by the same date. Interest applies if the payments are not made by the due date. This requirement may mean that there are difficulties in computing the preliminary tax because the prior year accounts may not have been finalised in time.
The standard form corporation tax return on ROS includes a self-assessment. ROS may calculate an assessment and the taxpayer is asked to consider each part, amend and/or accept it. Revenue may make an assessment on foot of the return, in particular where there are clear errors in it.
Revenue have up to 4 years to issue an assessment after the end of the relevant period which the return is made. This is provided the return gives a full and true disclosure of all relevant facts, is not negligent reckless or knowingly incorrect.
Where this is not the case, an assessment can be made later than four years. Where no return is made, Revenue may make an assessment based on information held. There is no time limit. Where new facts come to the taxpayer’s attention, there is an obligation to make an amended return without unreasonable delay.
Late filing/incomplete filing
If preliminary tax is not paid in full, interest is charged at 0.0219% per day (8% per annum) on the shortfall. The corporation tax return must be made within eight months and twenty one days of the end of the accounting period. If this is not done, surcharges and restrictions on relief, similar to those which apply to individuals, apply.
A company must file its corporation tax return within eight months and 21 days of the end of the relevant accounting period. If it does not do so, a surcharge of 5% of the amount of tax subject to a maximum of €12,695 applies where the return is made within two months of the date. A surcharge of 10% to a maximum of €63,458 applies where the return is made after the two month period. Interest also applies. Penalties apply.
Where a further or amended assessment is made by Revenue or an assessment is made where no return has been made, interest and (possibly) penalties will run from the due date. Where a full and true return has been made on time, liability usually arises one month after the amended assessment. If this is not the case, the liability date can be earlier.
Revenue may make enquiries asnecessary to satisfy itself regarding liability to corporation tax and any element of it. These enquiries may be made within the four-year period or outside that period, if a full and true return (not negligent et cetera) was not filed.
Restriction of claims
Claims for losses and allowances are also restricted where the return is submitted late. The restrictions are respectively 25% subject to a cap of €31,740 for filing two months late and a 50% restriction subject to a cap of €158,715 for filing late beyond this. This is over and above interest and penalties which would also arise. The preliminary tax payment is ignored in this context.
The local property tax in relation to any residential properties the company owns must also be filed and the relevant liability paid, in order to avoid the surcharge.
A negligent or fraudulent return is treated as not made in time. Therefore the surcharge applies unless the error is remedied by the due date for the return. If there are errors in the return, nut they are not fraudulent or negligent, the company may not be surcharged if it remedies the error within a reasonable time.
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