Corporation Tax Returns
The Irish corporation tax system operates on a self-assessment basis. Therefore, it is solely the responsibility of the company to calculate and pay its corporation tax liability within deadline.
Any company liable to corporation tax must submit a CT1 Form which is a Tax Return containing details of profits, chargeable gains and other relevant information as outlined in Section 884 TCA 1997.
This return must be filed within nine months of the end of the company’s accounting period but no later than the 23rd day of the month if the Tax Return along with payment of the associated tax liability is filed via the Revenue Online Service. Otherwise, the Return must be filed within eight months and twenty one days of the company’s year-end.
A company with a 31st December 2016 year-end, for example, must file its CT1 form on or before 21st September 2017 unless it files its Return and the relevant tax payment using the Revenue Online Service, in which case the deadline date is extended to 23rd September 2017.
An accounting period for corporation tax purposes cannot be longer than twelve months.
If a company has an accounting period of say, fifteen months for example, then it is deemed to have:
(a) Two accounting periods for Corporation Tax purposes and
(b) Two Preliminary Tax payment dates.
The first accounting period would be for the first twelve months and the second accounting period would be for the remaining three months.
Consequences of filing a late or incomplete/incorrect CT Return
If a company files (a) an incomplete or (b) an incorrect or (c) a late CT1 Form the following surcharges will apply:
If filed less than two months late, a 5% surcharge (subject to maximum of €12,695) will be calculated on the company’s CT liability for the accounting period in question. This surcharge will apply irrespective of whether the tax had been paid within deadline because this surcharge arises in relation to the late filing of the CT1 Form.
If filed more than two months late, a 10% surcharge (subject to maximum of €63,485) will be levied on the company’s tax liability for the period in question regardless of whether or not the tax had been paid on time.
Please be aware that the surcharge also includes any Income Tax due.
In addition to the above surcharges, in circumstances where a company does not submit its return on time, the following restrictions on the use of certain allowances and reliefs will also apply:
- If filed less than two months late, the reliefs and allowances will be restricted by 25%, subject to a maximum of €31,740 in each case
- If filed later than two months, the reliefs and allowances are restricted by 50%, subject to a maximum of €158,715 in each case.
For Group Relief to apply, both the surrendering and the claimant company must have submitted their Corporation Tax Returns within the deadline date.
In situations where the Corporation Tax Return has been filed on time but the Local Property Tax (LPT) Return or relevant payment is outstanding at the CT filing date then a surcharge of 10% will be levied on the final liability.
This surcharge will also be levied if an agreed payment arrangement for LPT has not been set up.
If the company subsequently pays its LPT liability in full, bringing its tax affairs up to date, the amount of the surcharge will be capped at the amount of the LPT liability involved.
In Ireland, companies are required to prepay a portion of their corporation tax liability – this is known as “Preliminary Tax”.
The rules for calculating Preliminary Tax depends on whether a company is considered to be a “small company” or a “non-small company”.
A “small company” for preliminary tax purposes is a company whose corporation tax liability for the previous twelve month accounting period did not exceed €200,000.
A company which qualifies as a “small company” has the option of computing its preliminary corporation tax payment on the lower of:
- 90% of the total estimated corporation tax liability for the current period, or
- 100% of the final corporation tax liability for the previous period.
A small company has the option of paying its Preliminary Tax one month before the end of its accounting period on a date no later than the 23rd day of the month.
Any balance of tax outstanding must be paid on or before the company’s tax return filing date i.e. the 23rd day of the ninth month following the end of the accounting period. In other words, if the accounting period ended on 31st December 2016 the balance of the tax would be payable by 23rd September 2017 providing the Return and payment were made via ROS otherwise it would be on or before 21st September 2017.
It is advisable to choose the second option because by paying 100% of the previous year’s CT liability this ensures that no underpayment will have been made by the Company thereby avoiding exposure to interest penalties.
Please be aware that if the company doesn’t pay sufficient preliminary corporation tax or if the preliminary tax is not paid on time, an interest charge will be levied. A daily simple interest rate of 0.0219% will arise on the difference between:
(a) 100% of the final CT liability and
(b) The amounts paid over to the Irish Revenue Authorities.
For companies which are not deemed to be “small companies” the following rules will apply:
—The first preliminary tax payment or “Initial Installment” falls due no later than the 23rd day of the sixth month from the commencement of the chargeable period. The payment due is the lower of
(a) 50% of the previous periods corporation tax liability or
(b) 45% of the current year’s liability.
—The second preliminary tax payment or “Final Installment” falls due no later than the 23rd of the month preceding the end of the chargeable period (i.e. by the 23rd day of the eleventh month of the accounting period). This payment must bring the total preliminary tax payment submitted to the Revenue Authorities to at least 90% of the total tax payable for the current chargeable period including the tax on any chargeable gains.
The company must file its CT1 Return and pay the balance of the Corporation Tax (i.e. the remaining 10%) no later than the 23rd day of the ninth month after the chargeable period ends.