Finance Act 2003 - Repayment, Interest and Time Limits

Section 17 provides, in relation to income tax, corporation tax and capital gains tax, for new arrangements to deal with claims for repayments, interest on repayments and Revenue’s right to raise assessments. This is part of a general package of measures regarding repayments and interest on repayments covering direct and indirect taxes.

In relation to repayments, a general right to repayment of tax overpaid is being provided for. The repayment will be made irrespective of whether the tax was overpaid under an assessment or otherwise and irrespective of the presence or absence of any mistake on the part of the taxpayer. Any repayment must be subject to a valid claim and be made within four years from the end of the period to which it relates. Subject to transitional arrangements, this four year time limit replaces the existing longer time limits, the longest of which is ten years. The new time limit applies to claims for repayment of tax overpaid in respect of the year 2003 onwards. The existing time limits will remain in place for claims made on or before 31 December 2004 for earlier years. Where there is no existing right to repayment, the four year time-limit will apply irrespective of the year concerned. From 1 January 2005, there will be a four year time limit for all claims.

In future, interest will be paid on repayments of tax by Revenue. Where the repayment arises because of a mistaken assumption by Revenue in the application of the law, interest will be paid from the date the tax was paid until the repayment is made. In all other cases, including repayments of preliminary tax, interest will be payable from the end of 6 months after the date on which a claim for the repayment becomes a valid claim until the repayment is made. The rate of interest provided is 0.011% per day or part of a day (approximately 4% per annum). The interest will be paid without deduction of tax and will not be taxable in the hands of the recipient.

In line with the new four year time limit for repayment claims, the period within which Revenue may raise assessments and make enquiries is, in general, being reduced to four years also. Time limits will not apply to cases of fraud or neglect on the part of the taxpayer. Currently there are no time limits for such cases and this position will continue.

The new regime is subject to Commencement Order(s) by the Minister for Finance.