Annual Conference 2019

11 – 13 April 2019

What’s New in Corporation Tax for Domestic Businesses?

Thomas Sheerin, KPMG

This paper highlights the key developments in corporation tax for domestic businesses including:

  • Finance Act 2018;
  • International corporation tax measures and developments;
  • Other technical developments
  • Tax compliance update and areas of Revenue focus

Finance Act 2018

Accelerated capital allowances

There were limited changes in corporation tax for domestic businesses in FA18. One of the areas in which there were amendments included the availability of accelerated capital allowances.

Section 19 of FA18 amends and commences the accelerated capital allowance scheme introduced by FA17 by amending Parts 9 and 36 and Schedule 25B of the TCA 1997 to introduce a new incentive for the provision of childcare equipment or fitness centre equipment for employees. Where a person has incurred “qualifying expenditure” on “qualifying machinery or plant” a 100% wear and tear allowance is afforded in the year in which the equipment is first used in the business.

In addition, FA18 inserts s843B to the TCA 1997 to apply accelerated industrial buildings allowances of 15% over 6 years and 10% in the seventh year for capital expenditure incurred on the construction of “qualifying premises”. Such a premises means “a building or structure which is in use for the purposes of providing childcare services or the facilities of a fitness centre to employees of the employer”. The facilities must be exclusively for the use of the employees and not accessible nor available for use by the general public. Further detail on this new incentive has been published by the Revenue in eBrief No. 38/19.

Section 18 of FA18 also introduced accelerated allowances for gas vehicles and refuelling equipment. This section amends the TCA 1997 by inserting s285C which provides that where a person has incurred qualified expenditure for the purposes of a trade a 100% wear and tear allowance shall be made in respect of qualifying refuelling equipment or qualifying vehicle to which that qualifying expenditure relates. “Qualifying refueling equipment” means refueling equipment which is unused and not second-hand, installed at a gas refueling station” and a “qualifying vehicle” means a gas vehicle, which is

  • Constructed or adapted for –
  • The conveyance of goods or burden of any description,
  • The haulage by road of other vehicles, or
  • The carriage of passengers
  • Unused and not second-hand, and
  • Either –
  • Not commonly used as a private vehicle and unsuitable to be so used, or
  • Provided or hired, wholly or mainly, for the purpose of hire to or the carriage of members of the public in the ordinary course of trade

As can be seen from the above definition, the vehicles in question must be new and does not include passenger cars.

Finally, in this area s17 of FA18 has amended s285A TCA 1997 which relates to the acceleration of wear and tear allowances for certain energy efficient equipment. This amendment sets out a criteria framework for products to qualify for accelerated wear and tear allowances and refers to the listing of energy efficient equipment that is to be established and maintained by the Sustainable Energy Authority of Ireland (SEAI). In order for energy equipment to qualify for the accelerated capital allowances, it must be named on this SEAI list.

Close company

Readers will be aware that s438A TCA 1997 extends the close company charge on loans to participators that applies under s438 TCA 1997 to scenarios where the loan is advanced by a company controlled by a close company. An amendment has been made by s20 of FA18 to extend the scope of the charge further to include any “relevant arrangement” which means “any arrangement, the main purpose, or one of the main purposes of which is to avoid or reduce the charge to tax under Section 438”. This new provision applies to a relevant arrangement entered into on or after 18 October 2018. It is understood that this anti-avoidance provision is designed to counteract schemes that involved the provision of a loan by a close company to a participator through a trust.

Intangible assets

FA17 reintroduced the 80% restriction on the utilisation of intangible asset allowances and interest. As readers will be aware, s291A(6) TCA 1997 previously restricted the aggregate capital allowances on intangible assets and interest incurred in connection with the provision of intangible asset, for any year to 80% of the trading income from the activities of (i) selling goods or services that derive the greater part of their value from the relevant tangible assets or (ii) managing, developing or exploiting such intangible assets. This restriction was abolished by FA14 for accounting periods commencing on or after 1 January 2015, such that the aggregate deduction available could be up to the full amount of the relevant trading income.

Revenue guidance published in February 2018 set out the approach on which the allowances and interest should be utilised where the relevant trading activities included intangible assets acquired before and after 11 October 2017. The amendment in s28 of FA18 puts this Revenue guidance on a statutory footing.

Where the relevant trade carried on by the company for an accounting period comprises relevant activities relating to a specified intangible asset or assets, the capital expenditure on which includes capital expenditure incurred by the company before 11 October 2017 (‘the earlier period’) and capital expenditure incurred by the company on or after 11 October 2017 (‘the later period’), then the trading income from the relevant trade shall for the purposes of the calculation of the deductible allowances/interest shall be deemed to consist of two separate income streams.

The first income stream consists of so much of the trading income from the relevant trade for the accounting period that relates to capital expenditure incurred in the earlier period and the second income stream consists of so much of the trading income for the relevant trade for the accounting period as relates to capital expenditure incurred in the later period. The aggregate of the allowances and interest which relates to capital expenditure incurred in the earlier period shall not exceed the amount of the first income stream and the aggregate of the amount of the allowances and interest related to capital expenditure incurred in the later period shall not exceed 80% of the amount of the second income stream. For these purposes, the law requires an apportionment of the trading income from the relevant trade between the first income stream and the second income stream on a just and reasonable basis, and any amount to be attributed to the first income stream shall not exceed an arm’s length amount. The company is also required to maintain and have available such records as may be reasonably required for the purposes of determining whether any such apportionment is made on a just and reasonable basis and whether any amount attributed to the first income stream exceeds an arm’s length amount. An example to illustrate the impact of this new legislation is shown in the slides.

Start-up corporation tax relief

Section 486C TCA 1997 provides for relief from corporation tax for start-up companies in the first 3 years of trading. The relief is granted by reducing the corporation tax payable on the profits of the new trade and gains on disposal of any assets used for the purposes of the new trade. The relief is linked to the amount of employers PRSI paid by a company in an accounting period and an overall limit of €40,000. Any unused relief arising in the first 3 years of trading, due to losses or insufficient profits, are available for carry forward for use in subsequent years. Section 22 of FA18 extends the availability of this relief to companies commencing in a new trade in 2019, 2020 and 2021. The relief had been due to expire on or before 31 December 2018.

Film corporation tax credit relief

FA13 introduced a revised film tax credit relief aimed at encouraging investment in Irish made films. This scheme provides relief in the form of a corporation tax credit related to the cost of production of certain films. The relief was due to expire at 31 December 2020. However, FA18 provides for a four year extension to 31 December 2024. In addition, a new time limited tapered regional uplift of 5% for productions in particular regional areas has been introduced. The regional uplift will apply to productions which take place on or after 1 January 2019. Where the uplift applies the credit will be available at the following rates for the following periods:

  • 37% for claims between 1 January 2019 and on or before 31 December 2020
  • 35% for claims made after 31 December 2020 but on or before 31 December 2021
  • 34% for claims made after 31 December 2021 but on or before 31 December 2022
  • 32% for claims made after 31 December 2022

The regional film development uplift is subject to EU approval. The Act also provides for a number of amendments to ensure that the relief operates in an efficient manner. The changes include a provision for the credit to move to a self-assessment system. An amendment is also included in respect to the application process to allow for the Department of Arts, Heritage and the Gaeltacht to issue a certificate to a producer company confirming whether a film is a qualifying film and whether it qualifies for the regional film development uplift.

Mutual agreement procedures and time limits

Many of Ireland’s double tax treaties and the EU arbitration convention provide a mechanism whereby the competent authority of each treaty country may resolve difficulties or disputes arising from double tax for a taxpayer by mutual agreement (MAP). A taxpayer can request MAP assistance from Irish Revenue. MAP is most often requested in relation to transfer pricing transactions between affiliates in a group where there is a difference in a view between the competent authorities as to the amount of the profits which should be subject to tax in each treaty country. In some cases the outcome of MAP may require the profits of an Irish company to be adjusted, and may result in a refund of tax. In these cases, the taxpayer will usually be required to submit revised returns for the effective accounting periods.

Section 59 of FA 2018 amends s959AA TCA 1997 to facilitate the amendment of an assessment for a chargeable period to give effect to a mutual agreement reached between the competent authority of the State and a competent authority of another jurisdiction. Any tax shall be paid or repaid as the case may be where appropriate in accordance with such assessment or amended assessment. Accordingly, the removal of the general 4-year time limit means there will be no time limit for revising tax returns to give effect to an agreed outcome of MAP.

International Corporation Tax Measures and Developments

I will now move onto providing an overview of the key international corporation tax measures and developments. These developments will be covered in greater detail by Louise Kelly and Emma Arlow and therefore the scope of my comments is to provide a brief overview of the key features of these measures.

Anti-Tax Avoidance Directive (ATAD)

The key features of ATAD are the introduction of an ATAD compliant exit tax provision, controlled foreign company rules, anti-hybrid and anti-reverse hybrid provisions and interest deduction limitations.

Exit tax

An ATAD compliant exit tax for companies which transfer their residence or business assets out of Ireland had to be implemented by 1 January 2020. The Minister announced on Budget Day that Ireland would bring forward the date of implementation of this new exit tax regime. Prior to that day Ireland had an exit tax regime which deemed a company which ceased to be tax resident in Ireland to dispose of its assets at market value. The unrealised gains were subject to capital gains tax charge at a rate of 33%. Companies that were ultimately controlled by EU/tax treaty resident persons and not controlled by Irish residents were excluded from the scope of the charge.

With effect from 10 October 2018, s32 FA18 substitutes a new Chapter 2 of Part 20 of the TCA 1997 to introduce the new ATAD compliant exit tax regime. The new regmime does not distinguish between the ultimate owners of a company in applying the charge and therefore broadens the scope of companies potentially subject to the revised exit tax regime. The rate of exit tax is set at 12.5%. However, a 33% rate will apply where a chargeable gain accruing on a deemed disposal asset under this new provision where the event forms part of a transaction to dispose of the asset and the purpose of the transaction is to ensure that the chargeable gain accruing on the disposal of the asset is charged at the standard rate of corporation tax rather than the 33% rate.

An exit charge does not apply to ‘specified assets’ such as Irish land, exploration rights or assets in use as part of a trade in Ireland. This is because such assets should remain within the charge to Irish tax.

The new legislation allows for a harmonised approach on intra EU transfers of assets. As a result, the market value of assets subject to exit tax in another EU member state shall be deemed to be the acquisition cost of the assets in Ireland. However, these provisions do not apply to treat the asset brought into Ireland as acquired market value for capital allowances purposes.

Controlled foreign company rules

As required under ATAD, Ireland has enacted Controlled Foreign Company rules (CFC) which will take effect for accounting periods beginning on or after 1 January 2019. In general, the new regime is to assess an Irish company with a CFC charge based on an arm’s length measure of the undistributed profits of the CFC that are attributable to the activities of significant people functions carried on in Ireland. The key features of the CFC rules are as follows:

  • Section 27 of FA18 introduces the CFC legislation into ss835I to 835Y of TCA 1997.
  • A CFC is a company which is not resident in the State, and controlled by a company or companies resident in the State.
  • If the CFC would not own assets or bear risks except for “relevant Irish activities” involving significant people functions/key entrepreneurial risk taking functions carried on in Ireland on behalf of the CFC, an amount of the undistributed income of the CFC attributable to the relevant Irish activities based on arm’s length principles is taxed under a CFC charge.
  • The CFC charge is equal to the undistributed income of the CFC to the extent such income is attributable to relevant Irish activities at a rate of tax applicable to the underlying attributable income.
  • The CFC charge does not apply to capital gains.
  • There are a number of exclusions from the CFC charge. It is expected that Revenue will release a detailed guidance in the near future which will assist businesses in understanding the scope of application of the various exclusions.

The above reflects a very brief overview of the new CFC regime which will be covered in greater detail by Louise Kelly and Emma Arlow.

Interest restriction

ATAD requires a Member State to introduce a new interest limitation ratio, designed to limit the ability to deduct borrowing costs when calculating taxable profits. It is intended to prevent the use of excessive leveraging and interest payments, which have been identified as a means of which base erosion and profit shifting by multinational enterprises can occur. The ATAD interest limitation rule operates by limiting the allowable deduction for net borrowing costs in a tax period to 30% of earnings before interest, tax, depreciation, and amortisation. ATAD permits the adoption of a €3million de minimus threshold for deducting interest expense which would exclude smaller taxpayers from scope.

Where a Member State already has targeted interest limitation rules which are equally as effective at preventing BEPS risks as the ATAD interest limitation ratio, the introduction of the interest limitation rules may be deferred until 1 January 2024. The Department of Finance published a public consultation on the implementation of these rules in November 2018 which indicated that the new rules may be introduced in Finance Bill 2019. That consultation period closed on 18 January 2019.

Transfer pricing

The Coffey Review of Ireland’s corporation tax code and the implementation of ATAD recommended incorporating the 2017 OECD transfer pricing guidelines directly into Irish legislation. These guidelines provide guidance on the application of the arm’s length principle, which requires that transactions between associated enterprises are priced as if the enterprise were independent, operating at arm’s length and engaging in comparable transactions under similar conditions in economic circumstances.

In February 2019, the Department of Finance published a consultation on the update of Ireland’s transfer pricing rules and that consultation closed on 2 April 2019. The updates to the Irish transfer pricing rules are expected to take effect from 1 January 2020 and will be provided for in Finance Bill 2019. The key considerations in relation to the proposed reforms to Irish transfer pricing rules are as follows:

  • It is intended that the legislation will be amended to include direct reference to the 2017 OECD transfer pricing guidelines.
  • The amendments to the existing regime may include the removal of the existing grandfathering exclusion for pre-1 July 2010 arrangements.
  • It is possible that the transfer pricing rules may be extended to include SMEs.
  • The transfer pricing rules at present only apply to profits or gains or losses arising from income within the charge under Case I or Case II of Schedule D. It is possible that the transfer pricing rules may be extended to include non-trading transactions.
  • It is expected that the legislation will be updated to provide that the required transfer pricing documentation is to be in line with the requirements of the 2017 OECD guidelines. Those guidelines provide for the preparation and maintenance of both a master file and a local file by multi-national groups.

Multi-lateral instrument (MLI)

The MLI is to be used to implement changes to bi-lateral double taxation agreements in order to counteract misuses of tax treaties that result in base erosion and profit shifting. Where the changes chosen by Ireland are also selected by a tax treaty jurisdiction the change takes effect in the tax treaty concerned once both countries have ratified the MLI under their domestic law. With the exception of its tax treaties with the Netherlands, Germany and Switzerland, Ireland proposes to extend MLI changes to all of its tax treaties. Ireland has included its treaty with the US as a covered treaty for the purposes of the MLI, however the US have not signed up the MLI agreement. The instrument of ratification of Ireland’s choices under the MLI was deposited with the OECD in January 2019. As a result, the MLI will come into force on 1 January 2019. Section 61 of FA18 amended Schedule 24A TCA 1997 to include reference to the MLI and the statutory instrument which was signed into law on 23 October 2018. This represented the final process in Ireland’s ratification of the MLI. Businesses claiming relief from taxes under tax treaties will need to monitor the adoption of the MLI in other jurisdictions to understand the effective date of operation and the impact of changes in individual treaties.

Other Technical Developments and Updates

The following section provides an overview of other various technical corporation tax developments and updates in recent months that are relevant for domestic businesses.

IFRS 16 – Leases

As part of eBrief No. 214/18, Revenue updated Tax and Duty Manual Part 04-06-04 to set out the tax treatment of lessors and lessees who apply international accounting standards when accounting for operating leases changes under IFRS 16. IFRS 16 was issued in January 2016 and applies to taxpayers that prepare their financial statements under IFRS for accounting periods beginning on or after 1 January 2019. This new standard replaces International Accounting Standard 17.

The most substantial change under IFRS 16 is in the context of lessees. With the exception of leases that have a term of less than 12 months, and where the asset is of low value, a lessee is now required to recognise a right of use asset representing its right to use the underlying lease asset and a lease liability representing its obligations to make lease payments. In effect, this means that all leases are to be treated by the lessee from 1 January 2019 as finance leases. As a result, the lessee will charge depreciation on the related asset over the economic life of that asset and will also recognise a finance charge in relation to the asset in its profit and loss account. For tax purposes, an adjustment will be required to add-back that depreciation and finance leasing charge that are recognised in the profit and loss account and a deduction should be claimed for lease rentals.

To the extent that transitional adjustments arise on the adoption of the new standard, s76A(4)(c) TCA 1997 provides that an amount representing the retrospective effect of adopting an accounting standard which is recognised in the opening reserves for the period in accordance with generally accepted accounting practice should be taxable or deductible, as the case may be, in computing the profits and gains of the company for the purposes of Case I or Case II Schedule D. Section 76A(4)(g) TCA 1997 requires that adjustment to be spread equally over five years.

Pre-trading expenditure

In eBrief no. 040/19, Revenue provide confirmation that a company may claim relief for pre-trading expenditure incurred by another company. This confirmation applies where one company has incurred the expenditure and another company subsequently commences the trade. This relief is permitted in circumstances where s400 TCA 1997 would apply if the transfer of the trade had taken place after the commencement of the trade.

Taxation of provisions and accruals

A new Tax and Duty Manual Part 04-05-06 was published in December 2018 and replaces pages 14 and 15 of Tax Briefing 41. This manual confirms the tax treatment of provisions and accruals which should generally follow the accounting treatment, subject to normal tax rules (e.g. wholly and exclusively for the purposes of the trade and revenue in nature). Section 76A(1) TCA 1997 provides that Case I or Case II profits of a gain or gains of a trade or profession carried on by a company are required to be computed in accordance with generally accepted accounting practice subject to any adjustment required or authorised by law in computing such profits or gains for those purposes. The relevant legislation in this regard is s76A TCA 1997, s81 TCA 1997 and case law.

The case law principles regarding the tax treatment of provisions and accruals are summarised in the Manual such that (1) the deductibility of a provision depends on whether accounts adequately states the taxpayer’s profits for the year and whether the provision is sufficiently reliable, (2) the question as to the reliability of the provisions made in the accounts is essentially a question of fact and degree and (3) the provision is sufficiently precise for tax purposes. The Manual includes a number of examples to illustrate when provisions and accruals are acceptable for tax purposes and when adjustments are required.

Particulars to Revenue

Readers are reminded in the filing obligations under s882 TCA 1997 which requires companies registered with the Companies Registration Office to register with Revenue when they commence the trade, there is a material change in their details or required to do so by notice from a Revenue Inspector. In eBrief No. 183/18, Revenue advised that notices have been recently issued to companies that are registered with the CRO but have not yet registered their trading status with Revenue. That notice required a reply either to submit a tax registration or to provide an update on the company status.

Letters of residence

eBrief No.135/18 reflect developments in how letters of residence are now provided by Revenue. From 16 June 2018, letters of residence for a validated request may now be downloaded from ROS. In addition, agents are able to request and receive letters of residence on behalf of clients. A small number of jurisdictions continue to require that the letter of residence is issued by Revenue on letterhead paper with the original signature of the Revenue official. In those circumstances, the taxpayer or their agent will need to liaise with their relevant Revenue district in order to obtain that form of certificate.

Deduction for family remuneration

A new Tax and Duty Manual Part 04-06-23 was recently published which sets out the principles for determining the tax deductibility of wages paid to relatives and connected persons under the wholly and exclusively principle. The manual sets out the case law principles for tax relief for such remuneration. This includes that the expenditure cannot have a dual purpose and that in such cases the full amount of the expenditure is non-deductible. In addition, the remuneration paid to the family member must be commensurate with their working time and in line with market rates.

Tax Appeals Commission determinations

In the past year there have been two determinations issued by the Tax Appeals Commission in relation to corporation tax (02TACD2018, 08TACD2019). Both cases dealt with the entitlement for a deduction for withholding tax under s81 TCA 1997 and a summary of the two cases is as follows.

The first determination related to a taxpayer engaged in the business of provision of software solutions globally. The company in the course of that trade licensed to customers the right to use certain software in exchange for a license fee/royalty. Foreign withholding tax was incurred on the royalty income in a number of countries. The company claimed a credit for foreign withholding tax in so far as was possible under s826 and Schedule 24 TCA 1997. The company claimed a deduction under s81 TCA 1997 for the excess non-creditable foreign withholding tax incurred. The Appeal Commissioners found in favour of Revenue on all five matters raised as part of the case. The key conclusion was that the foreign withholding tax represented a tax on income notwithstanding that it is applied to gross income rather than profits. As a result, a tax that is considered to be income tax charged on profits is not a deductible expense under s81 TCA 1997. It should be noted that the Tax Appeals Commission had been requested to state and sign a case for the opinion of the High Court in respect of this determination. This request was withdrawn prior to the 3 month limit contained in s949AQ TCA 1997.

A subsequent appeal was heard at the Tax Appeals Commission regarding the deductibility of given withholding tax under s81 TCA 1997 and a determination was made on 11 January 2019. The appeal concerned an independent proprietary trading form engaged in a trade of buying and selling shares and stocks including market making – the activity of standing ready to buy and sell a particular stock on a regular and continuous basis at a publicly quoted price. Certain stocks purchased were purchased come dividend and foreign withholding tax was borne on the dividend income for such shares held at the dividend payment date. The receipt of the dividend was found to be ancillary income to the main trading income being the profits of the buying and selling of shares. The dividends did not qualify for the portfolio dividend exemption in s21B(4C) TCA 1997 and Schedule 24 TCA 1997.

The Appeal Commissioner found in favour of the taxpayer that the foreign withholding tax was deductible under s81 TCA 1997. In the determination, the Commissioner distinguished the facts that underpinned the matter on appeal from those relevant to the earlier determination. The Commissioner drew analogies between the nature of foreign withholding tax borne in this case and that was discussed in the Harrods case which supports the deduction of foreign withholding tax as an expense of the trade. The Appeal Commissioner noted that foreign withholding tax is incurred on royalty income which is earned whereas the foreign withholding tax on dividends applies to dividend income that simply arising from passively holding stock at a particular date. In addition, the taxpayer did not claim double taxation relief in respect of dividend unlike the case of the withholding tax applied to the royalties. Lastly, the accounting treatment for the dividend reflects the withholding taxes at cost of sale and not a tax on profits. It should be noted that the Tax Appeals Commission has been requested to state and sign a case for the opinion of the High Court in respect of this determination.

The outcome of the above two determinations means that the technical position regarding the deduction for foreign withholding tax under s81 TCA 1997 remains unclear and can depend on the fact pattern of a taxpayer in question.

Tax Compliance Update and Areas of Revenue Focus

Finally, I would like to provide a brief overview of the topical corporation tax compliance matters encountered in practice over the last 12 months or so. Revenue have also provided a summary of the issues regularly encountered by Revenue auditors during Revenue audits in the past year.

An overview of the key current corporation tax compliance matters that give rise to errors or Revenue enquiries are as follows:

  • Disclosures in relation to distributions and dividend withholding tax in the corporation tax return where a corresponding dividend withholding tax return has not been filed.
  • Disclosures in relation to disposals under s615 and s617 TCA 1997 have not been included in the corporation tax return.
  • Disclosures in relation to the disposals of shares to which the participation exemption under s626B TCA 1997 applies. The corporation tax return requires disclosure of the details of the gain arising on such disposals.
  • The disclosure of associated companies within the corporation tax return. For larger groups, this disclosure can be a detailed return. In the past, Revenue accepted the submission of an excel file with the details of the associated companies. It is the authors understanding that the associated companies information now needs to be completed as part of the Form CT1 that is to be submitted via ROS.
  • All iXBRL submissions from 1 August 2018 must be tagged using a taxonomy. In addition detailed profit and loss account taxonomy in all iXBRL’s submissions with accounting periods ending on or after 1 January 2015.
  • Where an iXBRL submission is not made by the filing date, the corporation tax return is treated as incomplete and therefore can give rise to late filing surcharge. Technical difficulties have often been encountered on the upload of iXBRL financial statements which can remain “processing for an extended period”. In Tax and Duty Manual Part 47-06-01, Revenue confirm that where the due date for filing the iXBRL financial statements should pass while the release of such a file is awaited, the taxpayer should use My Enquiries to contact the Revenue branch dealing with the case to request that any surcharge that arises as a result of this issue is waived. Such a request should be accompanied by a screen grab of the ROS page showing the file stuck at processing and include a copy of the email sent to the ROS helpdesk requesting that the file is released and a copy of the iXBRL file that was being uploaded.

Revenue have provided the following detail regarding the issues that have been regularly encountered by their auditors during corporation tax audits in the last 12 months. These include:

  • Disallowable expenses not correctly added back in the computation.
  • Forms 46G not completed correctly or in full.
  • Incorrect capital allowances claimed, balancing allowances claimed in error and capital allowances on company cars not capped as specified limit of €24,000.
  • Corporation tax on chargeable gains – additional corporation tax due to a chargeable gain on insurance proceeds, error in capital gains tax calculation and invalid negligible value claims made in relation to conversion of intercompany loans shares.
  • Capital losses over claims including errors in the capital loss calculations and loss memos.
  • Errors in close company surcharge calculations.
  • Rental issues including expenses claimed incorrectly. Rental income not split from trading income on the Form CT1 and therefore not taxed at the correct rate. Interest deductions not appropriately restricted.
  • Section 247 relief including errors in relation to the interest charge calculation and interest incorrectly claimed on an accrual basis instead of a paid basis.
  • Tax relief at source calculations over claimed on employer funded medical insurance premiums.
  • R&D tax credit issues including incorrect amounts carried forward, over claimed or including expenses not relating to the carrying on of R&D and projects not qualifying for R&D.


While there were limited changes in FA18 on corporation tax for domestic businesses, the significant pace on corporation tax developments generally continues. There are a broad range of matters as outlined above on which significant changes are taking place. Advisors and tax professionals will need to be alert to the impact of these changes from both an advisory and compliance perspective.

Revenue Tax and Duty Manual – Part 09-02-05