Gerald Nash (Louth, Labour)
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345. To ask the Minister for Finance his plans for an enhanced corporate tax loss relief to provide additional liquidity supports for businesses; and if he will make a statement on the matter. [20485/20]

Paschal Donohoe (Dublin Central, Fine Gael)
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As the Deputy will be aware, the recently published Financial Provisions (Covid-19)(No. 2) Bill 2020 (the Bill) sets out the fiscal measures in the July Stimulus Plan and it follows from a range of COVID-19 financial assistance provided in recent months. These include income supports, new or repurposed debt funding arrangements, temporary waivers of commercial rates and “warehousing” of tax debts. This Bill contains a series of immediate measures to support businesses and increase consumer confidence, thereby stimulating the economy to return to capacity as businesses and society resume activity in accordance with public health advice and Government decisions. The Bill was designed to use the available budget to benefit as many sectors as possible, as quickly as possible, and as simply as possible.

It is in this context that section 11 of the Bill introduces a new measure to accelerate corporation tax loss relief, to provide cash flow support of up to €450 million for previously profitable companies that are now experiencing losses as a result of public health measures. It does this by allowing companies to estimate their losses for an accounting period containing all or part of the period March to December 2020. Companies may then make an early claim to carry back 50% of those estimated losses for offset against taxable profits of the prior accounting period, which will generate an immediate refund of some or all of the corporation tax paid for that accounting period.

Under normal rules, this carry back would not take place until up to nine months after the end of the loss-making accounting period, when tax returns and accounts are filed. The new provision allows claims to be made (and revised if necessary) at any time from four months into the loss-making accounting period and up to five months after the end of that accounting period. This significantly accelerates the tax repayments to companies that can be generated from the offset of these losses against previously taxed profits. The balance of the loss will be available for carry back in due course under normal rules, when accounts have been prepared after the end of the company’s accounting period.

As this new measure is a temporary acceleration of an existing relief, there is no incremental cost to the Exchequer in the medium term. However, it will provide much needed cash flow cash flow support of up to €450 million in a relatively simple and straightforward manner, thereby helping viable and tax compliant companies to continue trading.

Gerald Nash (Louth, Labour)
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346. To ask the Minister for Finance his plans for an income tax relief for self-employed persons to provide liquidity; and if he will make a statement on the matter. [20486/20]

Paschal Donohoe (Dublin Central, Fine Gael)
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The Financial Provisions (Covid-19) (No. 2) Bill 2020 contains a measure to provide for a new once-off income tax relief for self-employed individuals carrying on a trade or profession who were profitable in 2019 but, as a result of the Covid-19 pandemic, incur losses in 2020. A key objective of this measure is to provide a cash-flow boost to individuals carrying on a trade or profession as sole traders or members of partnerships.

It will allow such individuals to claim to have those losses (and certain unused capital allowances) carried back and deducted from their profits for the tax year 2019. This will reduce the amount of income tax payable in respect of those profits. Furthermore, because many people have paid preliminary tax for 2019 they will get a refund of tax which will be a cash flow boost.

Losses will be ring-fenced to the same trade only and the total amount of losses that can be utilised per trade will be capped at €25,000. Therefore, depending on the marginal rate of income tax that applies to the self-employed person, the maximum cash-flow benefit per business will be either €5,000 (20% rate) or €10,000 (40% rate).

The provisions also give an option to farmers who incur a loss in 2020 to step out of income averaging for the tax year 2020, notwithstanding that the farmer may already have stepped out of income averaging in one of the four preceding tax years.

Self employed persons may also be able to benefit from a number of the other non-tax measures contained in the July Stimulus Package announced last week.