Paschal Donohoe (Dublin Central, Fine Gael)
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I am advised by Revenue that taxpayers who are required to pay preliminary tax, whether individuals or companies, are required to estimate their tax liability for the year (or for an accounting period in the case of company) and to make payments on account in respect of that tax liability. The law affords taxpayers options on how to calculate their preliminary tax payments, including in most cases allowing the taxpayer to base the payment, either on their estimated liability for the current year, or period, or on their final tax liability for a previous year, or period. This gives the taxpayer the flexibility to choose the option that, having regard to their own circumstances, including fluctuations in taxable income between years, gives rise to the lowest preliminary tax payment.

A self-assessed income taxpayer can base their preliminary tax payment on the lower of either

- 90% of the current year’s liability; or

- 100% of the prior year’s liability.

Individuals who pay their tax by direct debit have the additional option of basing their preliminary tax payment on 105% of their liability for the pre-preceding year.

A company that is a “small company” – broadly, a company whose corporation tax liability in the preceding accounting period did not exceed €200,000 – also has the option of basing their preliminary tax payment on either 90% of its liability for the current accounting period or 100% of its liability in the preceding accounting period.

A company that is not a ‘small company’ - because its corporation tax liability in the preceding accounting period exceeded €200,000 - is required to pay preliminary tax in two instalments. The first instalment, which is due in the 6^thmonth of the accounting period, can be based on the lower of 50% of the company’s liability in the preceding accounting period or 45% of its liability for the current accounting period. The second instalment of preliminary tax, which is due in the 11^thmonth of the company’s accounting period, must bring the company’s preliminary tax payments up to 90% of its corporation tax liability for the current accounting period.

Therefore, those taxpayers who are experiencing difficult trading conditions because of the COVID-19 pandemic and whose income in 2020 will be significantly reduced compared to 2019, can opt to calculate their preliminary tax payment for 2020 based on their estimated liability for 2020 rather than their liability for 2019. This will minimise the amount of preliminary tax to be paid.

The Deputy may be aware that Revenue has introduced a series of measures to assist taxpayers who are negatively impacted by the current Covid-19 pandemic. Where a company files a CorporationTax Return (Form CT1) relating to an accounting period ending June 2019 onwards (and due from 23 March 2020 onwards), late because of Covid-19 circumstances, restrictions on the use of certain reliefs such as loss relief, which would normally apply where a return is filed late, will not be applied. Also, a surcharge for the late filing of Form CT1 relating to an accounting period ending June 2019 onwards is suspended until further notice. In addition, where financial statements, which were due to be filed electronically (iXBRL accounts) in March 2020 onwards, are filed late because of COVID-19 restrictions, the application of a surcharge for the late filing is suspended until further notice. The processing of refunds due will continue in the absence, due to the current restrictions, of the iXBRL accounts as part of the CT1.

My Department and Revenue continue to monitor developments and will respond appropriately to tax issues faced by taxpayers as a consequence of the COVID 19 situation and will keep taxpayers fully informed of decisions in this area.