Revenue Note for Guidance

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Revenue Note for Guidance

527 Interim refunds of appropriate tax

Summary

This section makes provision for interim refunds of appropriate tax in certain cases. A claim for an interim refund or offset (under section 960H) may be made in the cases of —

  • an ongoing business,
  • a start up business, and
  • cases of particular hardship.

Details

Ongoing businesses

(1) & (2) A specified person may make a claim for an interim refund or offset on account of appropriate tax referable to an accounting period or to a basis period for a year of assessment, if the person satisfies the following conditions —

  • the profits of the accounting period or basis period immediately before that which is the subject of the claim, must have been finalised and the tax on such profits paid, and
  • the claim must be supported by the appropriate forms given under section 524(2) or in the case of a partner, the documents referred to in section 529A(3).

(3) Any amount of PSWT in excess of the tax liability for the prior year and not refunded under this chapter is available for offset against other tax liabilities under section 960H. Any amount left after the offset against other taxes under section 960H is then available for a refund under this section.

(3A) The strict application of the rules in subsection (3) are modified in the case claims for interim refunds as respects the short tax “year” 2001 and the tax year 2002. Because only 74 per cent of the profits of the basis period referable to the short tax “year” are charged to income tax the use of the previous year (tax year 2000–2001) as the basis of determining the level of interim refund might easily prevent a genuine claimant from obtaining a refund. Similarly, where the claim is in respect of the tax year 2002, the refund would be higher than it ought to be because the reference year (i.e. the previous year) is the short tax “year”. This problem is solved by applying the following adjustments to the previous year’s tax:

  1. where the claim relates to the basis period for the short tax “year” 2001, 74 per cent, and
  2. where the claim relates to the basis period for the tax year 2002, 135 per cent.

Start-up businesses

(4) The conditions for ongoing businesses would not permit any interim refund or offset in the case of a specified person who had only started business, as such a person would not have any profits or tax payable for a preceding accounting period or basis period.

However, where appropriate tax is deducted in a period in which a trade or profession is set up and commenced, the inspector is authorised to make an interim refund or offset equal to the lesser of two amounts.

The first amount is an amount determined by applying tax at the standard rate of income tax to a sum derived by the formula “E x A/B x C/P”.

The formula seeks to identify an amount of business expenditure, which may be regarded as having been laid out to earn the income represented by the relevant payments. This is achieved firstly by applying to the estimated total expenditure of the accounting period or the basis period (“E” in the formula) the proportion that the income derived from relevant payments (“A” in the formula) bears to the total of the income derived from all receipts (“B” in the formula) and then by applying a time apportionment formula given by dividing the number of months in the claim (“C” in the formula) by the number of months or fractions of months (“P” in the formula) in the accounting period or basis period.

An inspector is to make such estimates, as are required by the formula to the best of his/her knowledge and belief and in accordance with the information available to him/her.

The second amount is the amount of the actual appropriate tax included in the vouched claim.

Hardship

(5) Where a person claims and proves hardship, the Revenue Commissioners may waive any one or more of the conditions for offsets or interim refunds laid down in the section and may authorise the inspector to make an offset or interim refund or a further offset or interim refund. The Commissioners are required to determine an amount of an offset or interim refund or further offset or further interim refund which they consider to be just and reasonable having regard to all the circumstances of the case and taking account of the objects and intentions of the earlier provisions of this section.

Income of a specified person

(6) “the income of a specified person” for an accounting period or a basis period for a year of assessment, is the total of all amounts received or receivable by the person which are taken into account in computing the profits or gains of the person’s trade or profession for that period. In this regard, the term “which are taken into account” covers the case of sums included a debtors or other on an accruals basis in the accounts of that person.

Relevant Date: Finance Act 2019