Revenue Note for Guidance

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Revenue Note for Guidance

395B Interim claim for carry-back of relevant losses and relevant allowances

(1) This subsection sets out a number of key definitions for the purpose of the section.

The term “the Acts” is given the same meaning as it has in section 1095. Section 1095 defines “the Acts” as: the Customs Acts, the statutes relating to the duties of excise and to the management of those duties, the Tax Acts, Parts 18A, 18B, 18C and 18D of the Taxes Consolidation Act 1997, the Capital Gains Tax Acts, the Value-Added Tax Acts, the Finance (Local Property Tax) Act 2012, the statutes relating to stamp duty and to the management of that duty, the Capital Acquisitions Tax Consolidation Act 2003, and the enactments amending or extending that Act, and any instruments made under any of the aforementioned instruments.

A “basis period” applies to an individual carrying on a trade or profession for any year of assessment and is the period on the profits of which income tax for that year is finally computed under Case I or II of Schedule D in respect of that trade or profession.

The term “estimated relevant allowances” means an amount that, based on the best estimate that may reasonably be made, is likely to equal the amount of the relevant allowances when they are calculated in accordance with section 304(3A).

An “estimated relevant loss” means an amount that, based on the best estimate that can may reasonably be made, is likely to equal the amount of the relevant loss when the amount of that loss is calculated in accordance with section 395A.

An “excess claim” is the amount by which the amount of tax repaid to the individual for the year of assessment 2019 computed in accordance with an interim claim exceeds the amount of tax that would have been repaid to the individual for the year of assessment 2019 if that repayment had been computed in accordance with a true and correct final claim;

A “final claim” has the meaning given to it in subsection (4)(c).

An “interim claim” has the meaning given to it in subsection (2).

The term “relevant allowances” has the same meaning as it has in section 304(3A).

A “relevant individual” means an individual carrying on a trade or profession who is of the opinion that it is probable that a relevant loss and/or relevant allowances will arise in the trade or profession.

A “return” has the same meaning as it has in section 959A. In section 959A, “return” means the return which is required to be prepared and delivered in accordance with Chapter 3 of Part 41A. Part 41A sets out the assessing rules including rules for self-assessment and Chapter 3 deals specifically with the making of returns by chargeable persons.

The “specified return date for the tax year” has the same meaning as it has in section 959A and means in relation to a tax year for income tax or capital gains tax purposes, 31 October in the tax year following that year.

A “tax compliant individual” means an individual who has complied with all of the obligations imposed on the individual by the Acts in relation to the payment or remittances of taxes, interest or penalties required to be paid or remitted and the delivery of returns.

The term “tax repaid” means any amount of tax that has been repaid to the individual by Revenue in respect of an excess claim or any amount of tax that would have been repaid to the individual by Revenue but for the offset of that tax against any other liability of the individual.

(2) This subsection provides that, subject to subsections (3) and (4), a relevant individual may make a provisional claim for relief in respect of an estimated relevant loss or estimated relevant allowances. This is referred to as an “interim claim”. Where the interim claim is in relation to an estimated relevant loss, the relief will be claimed in the same way as a claim would be made for relief in respect of a relevant loss under section 395A. Where the interim claim is in relation to estimated relevant allowances, the relief will be claimed in the same way as a claim would be made for relief in respect of relevant allowances under section 304(3A).

(3) This subsection sets out certain conditions that must be met before an interim claim may be made under subsection (2).

(3)(a)(i) Where the interim claim relates to a relevant loss sustained or relevant allowances to be claimed in the year of assessment 2020, the interim claim may not be made after 31 May 2021.

(3)(a)(ii) Where the interim claim relates to a relevant loss sustained or relevant allowances to be claimed in the year of assessment 2021, the interim claim may not be made either before the first four months of the basis period for the year of assessment 2021 have elapsed or after 31 May 2022.

(3)(b) Immediately before the claim is made, the relevant individual must be a tax compliant individual.

(4) This subsection sets out a number of conditions that must be met when an interim claim is made.

(4)(a) The interim claim must be accompanied by a declaration by the relevant individual that he or she has incurred, or can reasonably expect to incur, a relevant loss or relevant allowances.

(4)(b) The relevant individual must keep and have available all relevant records for the purposes of determining whether the estimated relevant loss and/or estimated relevant allowances were computed in a reasonable manner and to the best of that individual’s knowledge and belief.

(4)(c) A corresponding claim for relief in respect of the relevant loss or relevant allowances must be made under section 395A or 304(3A) by the specified return date for the tax year in which the relevant loss is sustained or relevant allowances are to be claimed. This is referred to as a “final claim”. If a final claim is not made by the specified return date and the amounts of the relevant loss and the relevant allowances that would be subject to such a claim are not lower than the estimated relevant loss and the estimated relevant allowances upon which the interim claim was made, then the interim claim will be deemed to be a final claim.

(5) Subsection (5) provides for the amendment of interim claims in certain circumstances. This is subject to section 959V.

(5)(a) Up to the point the final claim is made, the relevant individual should reduce the amount of an interim claim:

  • where the relevant individual becomes aware that the amount of the interim loss exceeds the correct amount of the estimated relevant loss or estimated relevant allowances; or
  • where the relevant individual determines that a lower portion of the estimated relevant loss or estimated relevant allowances should be claimed.

Such an amendment should be made as soon as is reasonably possible and the revised amount should reflect the correct amount or correct portion.

(5)(b) Subject to certain time limits, the relevant individual may increase the amount claimed:

  • where the relevant individual becomes aware that the amount of the interim loss is lower than the correct amount of the estimated relevant loss or estimated relevant allowances; or
  • where the relevant individual determines that a greater portion of the estimated relevant loss or estimated relevant allowances should be claimed.

Where the interim claim relates to a relevant loss sustained or relevant allowances to be claimed in the year of assessment 2020, such an amendment may not be after 31 May 2021. Where the interim claim relates to a relevant loss sustained or relevant allowances to be claimed in the year of assessment 2021, such an amendment may not be made after 31 May 2022.

(6) This subsection deals with the determination of statutory interest (under section 1080) and the payment of preliminary tax (under section 959AO) in circumstances where a relevant individual makes an interim claim which gives rise to an excess claim.

(6)(a)(i) The date on which the tax is repaid or offset in respect of the excess claim will be the date on which the amount of the tax became due and payable for the purpose of determining interest in accordance with section 1080(2)(c).

(6)(a)(ii) Where the interim claim was made neither deliberately or carelessly and the relevant individual reduces the interim claim to reflect the correct amount as soon as is reasonably possible, the date on which the claim is reduced will be the date on which the tax became due and payable for the purposes of determining interest in accordance with section 1080(2)(c). For the purpose of paragraph (a)(ii), the terms “deliberately” and “carelessly” are to take their meaning from section 1077E, which sets out the penalties that apply for deliberately or carelessly making an incorrect return.

(6)(b) Tax repaid pursuant to this section will be disregarded for the purpose of determining whether the relevant individual paid the correct amount of preliminary tax in accordance with section 959AO(3).

Paragraph (b) will not apply where an interim claim is made in a return in respect of which subsections (2) or (5) of section 1077E applies. The effect of this paragraph is that paragraph (b) will not apply where the interim claim was made in an incorrect return either deliberately or carelessly.

Relevant Date: Finance Act 2020