Revenue Note for Guidance

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Revenue Note for Guidance

420B Group relief: Relief for certain losses on a value basis

Summary

This section provides group relief on a value basis for —

  • trading losses which have been incurred by a surrendering company in an accounting period in a trade the income from which is taxable at the standard rate of corporation tax, and
  • charges that are paid for an accounting period wholly and exclusively for the purposes of a trade carried on by a company the income from which is taxable at the standard rate of corporation tax.

Relief is given by reducing corporation tax of a claimant company for the corresponding accounting period by an amount determined by applying the relevant corporation tax rate to the amount of the unrelieved loss. Corporation tax which is referable to profits of policyholders is excluded from relief under this section.

Details

(1) “relevant corporation tax” is the corporation tax which can be reduced by the relief. It is the corporation tax which would be chargeable for the accounting period apart from:

  • tax withheld by the company from certain payments (sections 239 and 241) which have been paid over to Revenue, and
  • surcharges on undistributed income (sections 440 and 441).
  • any corporation tax attributable to a life business (within the meaning of section 706) where that corporation tax is referable to profits of policyholders.

relevant trading charges on income” and “relevant trading loss” have the same meaning as they have respectively in sections 243A and 396A. A relevant trading loss is a trading loss incurred by a company in an accounting period other than so much of the loss as is incurred in an excepted trade – (i.e. a trade the income from which is taxable at the 25 per cent rate). Moreover, it does not include any amount that is the relevant amount of the loss for the purposes of section 403(4) or any loss that would be ring-fenced under that subsection if section 403(8) had not been enacted. This means that losses that are or would, but for the provision of section 403(8), be subject to the ring-fence in section 403(4) do not qualify for relief on a value basis under this section.

(2) Where a surrendering company has incurred a relevant trading loss or has an excess of relevant trading charges which cannot be relieved under section 243A, 396A or 420A, a claimant company can get relief for the losses or excess of charges.

(3) Where a company claims relief under this section the relevant corporation tax for the accounting period is to be reduced by an amount determined by applying the standard rate to those losses or charges.

(4) Special rules are provided to determine the amount of the loss or charges which are to be regarded as having been used. The amount of losses or charges which are to be regarded as used is determined by regrossing the loss relief given at the standard corporation tax rate. The amount so determined is regarded as relieved.

Relevant Date: Finance Act 2020