Dáil Éireann Debate, Thursday - 30 July 2020
345. Deputy Ged Nash asked 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]
Amharc ar fhreagraAs 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.
