Wide ranging changes have been introduced by the Finance Acts 2012 and 2013 to the self-assessment and tax compliance system for companies.

Finance Act 2012 deleted Parts 39 and 41 TCA 1997 and replaced them with Part 41A TCA 1997. Finance Act 2013 introduced further changes; most of these changes will apply to companies in respect of accounting periods beginning on or after 1 January 2013 and will generally apply to returns due for filing from this September onwards.

Self-assessment

The new system of self-assessment means that you will now have to actually calculate a company’s tax liability (or tax refund) and include this calculation as part of the corporation tax return “Form CT1” – referred to as “a self-assessment” [section 959R(1) TCA 1997].

A self-assessment must include the following details for the accounting period covered by the Form CT1:

• the amount of income, profits or gains arising;
• the amount of tax chargeable;
• the amount of tax payable;
• the balance of tax due and payable or the amount of tax overpaid and available for offset or repayment by Revenue; and
• the amount of any surcharge under section 1084 TCA 1997 (i.e. surcharge payable due to late filing of the CT1).

Changes have been made to the Form CT1 to cater for the above requirements. Two new sections have been added - CT self-assessment and CGT self-assessment. The CT self-assessment has two columns, A and B. Column A is a Revenue calculation based on the information input into the CT1. The Revenue Online Service “ROS” facility calculates the tax liability and automatically inserts the relevant amounts into Column A of the CT self-assessment.

You may accept this calculation or input your own figures into Column B of the CT self-assessment. The “calculate” facility remains on ROS and can be used to provide the tax computation for the CT self-assessment. If you use the ROS calculation facility and it is subsequently discovered that the ROS computation was incorrect, interest will not apply to any underpayment if that underpayment is settled within 1 month of the assessment being amended.

Completion of the self-assessment section is mandatory.

Under the new system, a Notice of Assessment will no longer be issued following the filing of the Form CT1. However, Revenue retains the right to issue assessments where it is deemed necessary and appropriate. Upon filing the Form CT1, you will receive acknowledgement of submission of the CT1 and the CT self-assessment.

All returns filed through ROS must be amended via ROS. Where amendments are to be made to a return, you must also complete an amended self-assessment. Where self-assessment figures are amended without any other changes being made to the Form CT1, you must give the reasons for the amendments. Again, you will receive acknowledgment of submission of the amended CT1 and self-assessment.

The penalty for failing to make a self-assessment in a return is €250, and for failing to make an amended self-assessment in an amended return is €100. In practice such penalties are unlike to arise as ROS does not allow the submission of a return unless a self-assessment has been completed.

Self-correction

Under section 959V(1) TCA 1997 a tax return may be amended upon giving notice to Revenue. As outlined above, where a return is to be amended a self-assessment must also be amended.

Notice of amendment must be given in writing to the company’s tax district. The notice and self-assessment will be given by electronic means when the return was filed via ROS. However, a notice of self-correction may not be made where either:

• Revenue has commenced enquiries in relation to the return or self-assessment, or
• Revenue has commenced an audit or other investigation in relation to the company’s tax affairs for the period.

Self-correction may still be available where the Revenue enquiry relates to a different accounting period.

Originally the self-correction facility had to be availed of within 12 months of the specified return date for an accounting period. Finance Act 2013 extended this deadline with the result that the self-correction facility is now available for a period of four years from the end of the accounting period to which the return relates [section 959V(6)(a) TCA 1997].

Where legislation provides that a claim for an exemption, tax credit or some other tax relief must be made within a period shorter than the normal four years, a self-correction cannot be made after the end of this shorter period where it relates to an adjustment of a claim for such exemption, tax credit, etc.

Expression of Doubt

Section 959P TCA 1997 has introduced major changes to the rules relating to an “Expression of Doubt” claim, including a significant increase in the level of information required to support such a claim.

Where an expression of doubt claim is being made, you must:

1. prepare the tax return for the period to the best of your belief as to the correct application of the law in relation to the matter in doubt;
2. file the return;
3. deliver the claim on or before the specified return date;
4. include a letter of expression of doubt with the return; and
5. submit supporting documentation to the company’s Inspector of Taxes in relation to the claim.

In addition, the letter expressing doubt must include:

1. full details of the facts and circumstances of the matter in doubt;
2. specify the doubt, the basis for the doubt and the law giving rise to the doubt;
3. identify the amount of tax in doubt in respect of the accounting period to which the claim relates;
4. list or identify the supporting documentation being submitted to the Inspector in relation to the matter; and
5. be clearly identified as a letter of expression of doubt for the purposes of section 959P TCA1997.

Documentation in support of the claim should be e-mailed to the company’s tax district, by way of Revenue’s secure e-mail service. You will need to register for this secure service and the registration procedure can be completed via the Revenue website at: www.revenue.ie/en/online/secure-email.html

An expression of doubt claim may be refused where Revenue is of the opinion that the doubt is “not genuine”. A claim will be considered “not genuine” where a Revenue officer is of the opinion that:

1. having regard to guidelines published by Revenue on the application of the law in similar circumstances and to any documentation delivered to the Inspector on the matter, that the matter is sufficiently free from doubt as not to warrant an expression of doubt; or
2. the chargeable person was acting with a view to the evasion or avoidance of tax.

Right of Revenue to Make Enquiries or Issue Assessments

Revenue’s entitlement to make enquires is contained in section 959Z TCA 1997. The general rule is that enquiries must be made within four years from the end of the accounting period in which the return was delivered, unless:

1. no return was delivered for the accounting period;
2. a Revenue officer is not satisfied with the sufficiency of the return having regard to any information received;
3. a Revenue officer has reasonable grounds for believing that a return delivered does not contain a full and true disclosure of all material facts necessary for the making of an assessment for the accounting period; or
4. a Revenue officer has reasonable grounds for believing that any form of fraud or neglect has been committed by or on behalf of the company in connection with or in relation to tax due for the accounting period.

You should be aware that the four year rule does not apply to Revenue enquiries made under section 811 TCA 1997 (General Anti-Avoidance Provisions).

Where a return has been filed and a full and true disclosure made of all material facts, Revenue cannot make an assessment or amended assessment later than four years from the end of the chargeable period in which the return was filed. However Revenue may go outside this four year period in relation to the making or amending of assessments in the case of (iii) or (iv) as previously outlined.

The use of the phrase “has reasonable grounds” above would appear to give Revenue greater discretion and scope to make enquiries or issue/amend assessments outside the normal four year time limit.

Tax Appeals

A new tax appeal system has been introduced and the provisions are contained in section 959AF to section 959AL, TCA 1997.

An appeal must specify each amount in the assessment being appealed and the exact grounds for the appeal. If a notice of appeal does not contain this information, then the notice will be deemed invalid and the appeal will be deemed not to have been made.

Any grounds for appeal not stated in the notice cannot be included at a later date, unless an Appeal Commissioner (or a Circuit Court judge), is satisfied that it could not reasonably have been stated in the notice.

No appeal may be made against a self-assessment or against an amount specified in such an assessment. In addition, no appeal may be made against a Revenue assessment until the return has been submitted and the appropriate tax (and interest) paid. The tax to be paid will be based on the self-assessment included in the tax return, or where no self-assessment was included, on the basis of information contained in the return.

An application for appeal may be refused by Revenue where the above requirements are not satisfied within the normal 30 day period for lodging an appeal.

Summary

The changes to the CT compliance system outlined above are significant. Some changes will be welcomed whilst others may give cause for concern particularly where they enhance the already significant powers available to Revenue.

Michael Smith is a Tax Director with Somers Murphy & Earl Ltd

Email: Msmith@somers.ie