1085 Corporation tax – late returns: restriction of certain claims for relief

Summary

This section is designed to act as a deterrent against the late submission of tax returns by companies. It provides for effective restrictions on the use of a number of reliefs (that is, certain trading losses, excess capital allowances, group relief and advance corporation tax offset) where a company fails to file its tax return on time (that is, within 9 months of the end of the company’s accounting period). The restrictions are graded by reference to the length of the delay in filing and there is a cap on the level of each restriction. In the majority of cases this measure will not amount to a complete denial of reliefs. The only adverse affect on most companies which fail to submit their tax return on time will be a cash flow one. The scheme prevents the companies concerned from using the particular reliefs to their best advantage. However, the losses or offsets in question can be transferred to a later accounting period.

Details

Definitions

(1)(a) “chargeable period” is an accounting period of a company.

“group relief” has the meaning set out in section 411.

“return of income” is a return which a company is required to deliver under Chapter 3 of Part 41A..

“specified return date for the chargeable period” has the meaning set out in section 950A.

Failure to make a return

(l)(b) Section 1084(1)(b)(i), (ia), (ib), (ii) and (iii) are to apply for the purposes of this section as they apply for the purposes of that section. This ensures that in the circumstances outlined in those provisions (namely, the fraudulent or negligent delivery of an incorrect return, the failure of a person to make a return in the prescribed manner, the failure to supply details in relation to certain specified reliefs which are required to be included on a return, the failure to rectify a known error in a return which has been delivered to the inspector and the failure to respond to an inspector’s enquiry in relation to a return which has been delivered to the inspector) a company is regarded as not having made a return of income for a chargeable period before the specified return date for that chargeable period.

Restriction

(2) The section provides that if a company fails to submit its return of income for a chargeable period on or before the specified return date for the chargeable period —

• (2)(a) any claim for the chargeable period under section 308(4) (for the set-off of certain excess capital allowances against other profits), 396(2) (for the set-off against other profits of trading losses), section 396A(3) (for the backwards or sideways set-off against relevant trading income) or 399(2) (the carry-back of excess “Case V” losses) is to be restricted so that the amount by which the company’s profits of the chargeable period or any other chargeable period are to be reduced by virtue of the claim is to be 50 per cent of the amount it would have been but for this section,
• (2)(b) the amount of group relief that the company may claim for the chargeable period is not to exceed 50 per cent of the company’s profits for that period as reduced by any other relief from tax other than group relief,
• (2)(ba) the total amount of the relevant trading loss which be reclaimed under section 396B is treated as reduced by 50 per cent,
• (2)(c) the total amount of a trading loss for the chargeable period which the company may surrender (to another member of the same group of companies) under section 420 is treated as reduced by 50 per cent, and the total amount of excess Case V capital allowances, excess management expenses and excess charges for the chargeable period which a company may surrender under the same section are to be reduced by 50 per cent,
• (2)(ca) the total amount of the loss or excess that can be reclaimed under section 420A is treated as reduced by 50 per cent, and
• (2)(cb) the total amount of the relevant trading loss that can be reclaimed under section 420B shall be treated as reduced by 50 per cent.

(3) Subject to subsection (4), the 50 per cent restriction or reduction referred to above is subject to a maximum amount in any particular case. There is a maximum of €158,715 in each case for those restrictions or reductions.

(4) In cases where the delay in filing a return is less than two months the amount of the restriction is effectively reduced from 50 per cent to 25 per cent subject to a maximum amount restricted of €31,740.

Relevant Date: Finance Act 2021