Temporary acceleration of corporate tax loss relief

Aug 10, 2020

Revenue created a new Tax and Duty Manual to provide guidance on the temporary acceleration of corporate tax loss relief for accounting periods affected by the COVID-19 pandemic and related restrictions. Section 11 of the Act provides for the relief through the introduction of section 396D TCA 1997. It allows companies to estimate their trading losses for certain accounting periods and allows the carry back of up to 50 per cent of those losses on an accelerated basis.

Ordinarily, a claim to carry-back trading losses can only be made after the end of the accounting period, in which the loss is incurred and following the filing of a tax return for that period. However, section 396D TCA 1997, now allows for the acceleration of this loss relief through interim claims.

Companies must be tax compliant and must have incurred or expect to incur a trading loss in an accounting period which includes some or all of the period from 1 March 2020 to 31 December 2020. An interim claim can be made as early as 4 months after the beginning of the accounting period.

In order to be eligible for an interim claim, the company must be fully compliant, in that they must have complied with their obligations under tax legislation in relation to filing returns and paying taxes. Companies who qualify for tax debt warehousing and/or have a PPA for non-COVID-19 tax debt will still be regarded as tax compliant.

Revenue have introduced temporary procedures for submitting an interim claim:

  • The Form CT1 for the preceding accounting period, for which the estimated losses are being carried back to must be filed.
  • The claim for accelerated loss relief can then be made by amending the Form CT1 for the preceding accounting period through ROS.
  • A note in the Additional Notes section of the Form CT1 must be included in the amended Form CT1, notifying Revenue that the claim is an interim claim under section 396D. A template note has been included in the appendix of the new manual.

You must wait at least one day between filing the Form CT1 and amending it for the accelerated loss relief claim. A company will be able to revise an interim claim upwards or downwards as the specified accounting period progresses and up to 5 months after that period ends.

Further guidance on the acceleration of corporate tax loss relief can be found in the manual Part 12-03-05.