Financial Provisions (Covid-19) (No. 2) Act 2020

Covid-19 losses

10. The Act of 1997 is amended—

(a) in section 304, by inserting the following subsection after subsection (3):

“(3A) (a) (i) In this subsection—

‘relevant period’ means the period beginning on 1 January 2020 and ending on 31 December 2020;

‘specified allowance’ means an allowance referred to in section 531AU(2);

‘relevant allowances’ has the meaning assigned to it in paragraph (b).

(ii) For the purposes of paragraph (b), where the basis period for the year of assessment 2020 is other than the relevant period, the specified allowances of any basis period which overlaps with the relevant period shall be apportioned to the relevant period in proportion to the number of months or fractions of months in the respective periods.

(b) Where an individual carrying on a trade, either solely or in partnership, claims one or more specified allowances, or part of one or more specified allowances, in respect of the relevant period to which, but for the making of a claim under paragraph (c), effect would be given in the following year or years under subsection (4)(in this subsection referred to as the ‘relevant allowances’), the individual may make a claim under paragraph (c).

(c) (i) Subject to section 395C, an individual may make a claim under this paragraph to have any portion of the relevant allowances carried back and that portion shall, for the purpose of making the assessment to income tax for the year 2019, be added to the amount of the allowances to be made under this Part in taxing the trade for that year.

(ii) Where relief is claimed under this paragraph, effect shall be given in respect of allowances from an earlier period in advance of allowances from a later period.

(iii) Allowances in respect of which a claim is made under this paragraph cannot be used, directly or indirectly, to create or augment a loss under Chapter 2 of Part 12.

(d) If and in so far as relief for relevant allowances is given to an individual under this subsection, the individual shall not be entitled to relief in respect of those relevant allowances under any other provision of the Income Tax Acts.”,

(b) in Part 12, by inserting the following Chapter after section 395:

“Chapter 2A

Income tax: Covid-19 loss relief

Right to carry-back losses sustained between 1 January 2020 and 31 December 2020

395A. (1) In this Chapter—

‘relevant period’ means the period beginning on 1 January 2020 and ending on 31 December 2020;

‘relevant loss’ has the meaning assigned to it in subsection (2).

(2) Where an individual carrying on a trade or profession, either solely or in partnership, has sustained a loss in the relevant period in respect of which that individual could, but for the making of a claim under subsection (3), make a claim to carry forward such loss under section 382, (in this section referred to as the ‘relevant loss’) the individual may make a claim under subsection (3).

(3) Subject to section 395C, an individual may make a claim under this subsection to have any portion of the relevant loss carried back and deducted from or set off against the amount of profits or gains on which the individual is assessed under Schedule D in respect of the trade or profession concerned for the year of assessment 2019 and, on the making of the claim, the relief shall be given as a deduction from or set off against the amount of those profits or gains.

(4) If and in so far as relief for any relevant loss has been given to an individual under subsection (3), the individual shall not be entitled to claim relief in respect of such relevant loss under any other provision of the Income Tax Acts.

(5) Where relief is claimed under this section, relief shall be given in respect of losses sustained in an earlier period in advance of losses sustained in a later period.

Interim claim for carry-back of relevant losses and relevant allowances

395B. (1) For the purposes of this section—

‘the Acts’ has the same meaning as it has in section 1095;

‘basis period’, in respect of an individual carrying on a trade or profession for any year of assessment, is the period on the profits or gains of which income tax for that year is to be computed under Case I or II of Schedule D in respect of that trade or profession or where by virtue of the Acts the profits or gains or income of any other period are to be taken to be the profits or gains or income of that period, that other period;

‘estimated relevant allowances’ means an amount that, based on the best estimate that may reasonably be made, is likely to equal the amount of the relevant allowances when the amount of those allowances is calculated in accordance with section 304(3A);

‘estimated relevant loss’ means an amount that, based on the best estimate that may reasonably be made, is likely to equal the amount of the relevant loss when the amount of that loss is calculated in accordance with section 395A;

‘excess claim’ means the amount by which the amount, referred to in this definition as ‘A’, exceeds the amount referred to in this definition as ‘B’:

(a) A, being the amount of tax repaid to the individual for the year of assessment 2019 as computed in accordance with an interim claim made pursuant to this section, and

(b) B, being the amount of tax that would have been repaid to the individual for the year of assessment 2019 if that amount had been computed in accordance with a true and correct final claim;

‘final claim’ has the meaning given to it in subsection (4)(c);

‘interim claim’ has the meaning given to it in subsection (2);

‘relevant allowances’ has the same meaning as it has in section 304(3A);

‘relevant individual’ means an individual carrying on a trade or profession in whose opinion it is likely that a relevant loss or relevant allowances will arise in respect of that trade or profession;

‘return’ has the same meaning as it has in section 959A;

‘specified return date for the tax year’ has the same meaning as it has in section 959A;

‘tax compliant individual’ means an individual who has complied with all obligations imposed on the individual by the Acts in relation to—

(a) the payment or remittances of taxes, interest or penalties required to be paid or remitted under the Acts, and

(b) the delivery of any returns to be made under the Acts;

‘tax repaid’, in relation to an excess claim, means—

(a) any amount of tax that has been repaid to the individual by the Revenue Commissioners, and

(b) any amount of tax that would have been repaid to the individual in respect of the excess claim but for the offset of that tax against any other liability of the individual in accordance with section 960H.

(2) Subject to subsections (3) and (4), a relevant individual may make a provisional claim for relief under section 395A or 304(3A), as the case may be (in this section referred to as an ‘interim claim’) as if—

(a) references to relevant losses in section 395A were references to estimated relevant losses, and

(b) references to relevant allowances in section 304(3A) were references to estimated relevant allowances.

(3) (a) Subject to paragraph (b), an interim claim made pursuant to subsection (2), where the interim claim relates to relevant losses sustained, or relevant allowances that are to be claimed—

(i) in the year of assessment 2020, may not be made after 31 May 2021, or

(ii) in the year of assessment 2021, may not be made—

(I) earlier than the end of the period of 4 months from the beginning of the basis period for the year of assessment 2021, or

(II) after 31 May 2022.

(b) An interim claim may only be made where, immediately before the claim is made, the relevant individual is a tax compliant individual.

(4) Where a relevant individual makes an interim claim—

(a) the interim claim shall be accompanied by a declaration by the relevant individual that he or she has incurred, or may reasonably expect to incur, a relevant loss or relevant allowance, as the case may be,

(b) the relevant individual shall maintain and have available such records which may reasonably be required for the purposes of determining whether the estimated relevant losses and the estimated relevant allowances have been computed in a reasonable manner and to the best of that individual’s knowledge and belief, and

(c) a claim under section 395A or 304(3A), as the case may be, shall be made by the specified return date for the tax year in which the relevant loss is sustained or relevant allowances are claimed (in this section referred to as the ‘final claim’), as the case may be, and if no such claim is made by that date then, where the amounts of the relevant loss and the relevant allowances that would be subject to such a claim are not lower than the estimated relevant loss and the estimated relevant allowances upon which the interim claim was made, the interim claim shall be deemed to be a final claim.

(5) Subject to section 959V, where subsequent to making an interim claim—

(a) but before making a final claim—

(i) it comes to an individual’s notice that the amount of the estimated relevant losses or estimated relevant allowances are lower than those upon which the interim claim has been made, or

(ii) an individual determines that a lower portion of the estimated relevant losses or estimated relevant allowances should be claimed pursuant to this section,

the individual shall, without unreasonable delay, reduce the amount in respect of which the interim claim is made accordingly;

(b) but before the date referred to in paragraph (a)(i) or (a)(ii)(II) of subsection (3), as appropriate—

(i) it comes to an individual’s notice that the amount of the estimated relevant losses or estimated relevant allowances are greater than those upon which the interim claim has been made, or

(ii) an individual determines that a greater portion of the estimated relevant losses or estimated relevant allowances should be claimed pursuant to this section,

the individual may increase the amount in respect of which the interim claim is made accordingly.

(6) (a) Where an individual makes an interim claim which gives rise to an excess claim—

(i) then, subject to subparagraph (ii), the tax repaid in respect of the excess claim shall carry interest as determined in accordance with section 1080(2)(c) as if a reference to the date when the tax became due and payable were a reference to the date the amount was repaid by the Revenue Commissioners or offset in accordance with section 960H, as the case may be,

(ii) where the interim claim was made neither deliberately nor carelessly (within the meaning of section 1077E) and the individual, without unreasonable delay upon it coming to the individual’s notice that the claim is overstated, reduces the claim by such amount as is necessary to ensure it is no longer overstated, the tax repaid in respect of the excess claim shall carry interest as determined in accordance with section 1080(2)(c) as if a reference to the date when the tax became due and payable were a reference to the date the claim was reduced.

(b) Subject to paragraph (c), for the purpose of the application of subsection (3) of section 959AO in determining whether an amount of preliminary tax has been paid by the individual in accordance with that subsection, no account shall be taken of any amount of tax repaid to the individual pursuant to this section.

(c) Paragraph (b) shall not apply where an individual makes an interim claim in a return to which subsection (2) or (5), as the case may be, of section 1077E applies.

Limitation of relief for relevant losses and allowances

395C. (1) In this section—

‘relevant allowances’ has the same meaning as it has in section 304(3A);

‘specified individual’ means an individual to whom Chapter 2A of Part 15 applies, prior to making a claim under this Chapter or section 304(3A).

(2) Subject to subsections (3) and (4), the total amount of relevant losses and relevant allowances in respect of which an individual carrying on a trade or profession may claim relief in the year of assessment 2019 under this Chapter and section 304(3A) shall not exceed €25,000.

(3) Where an individual carrying on a trade or profession is a specified individual, the total amount of relevant losses and relevant allowances which that individual may claim to have carried back is restricted in accordance with subsection (4).

(4) The restriction referred to in subsection (3) is that the total amount that may be claimed under this Chapter and section 304(3A) shall be limited such that there shall be no reduction in the amount of any other relief used, within the meaning of section 485C(2)(a), in respect of the year of assessment 2019 prior to claims being made under this Chapter or section 304(3A).”,

and

(c) in section 657—

(i) in subsection (6A)(d), by substituting “an election in accordance with this subsection or subsection (6B) has not been made” for “an election has not been made”,

(ii) by inserting the following subsection after subsection (6A):

“(6B) (a) In this subsection—

‘Covid-19 period’ means the period beginning on 1 January 2020 and ending on 31 December 2020;

‘Covid-19 deferred tax’ means the amount of income tax determined by the formula—

A — B

where—

A is the amount of income tax which would, apart from this subsection, be charged on an individual by virtue of subsection (6) in accordance with subsection (5) in respect of a year of assessment, and

B is the amount of income tax which would, apart from this subsection, be chargeable in accordance with Chapter 3 of Part 4 in respect of the year of assessment 2020.

(b) This subsection applies to an individual who—

(i) has made a claim under subsection (6A) in respect of the year of assessment 2019 or one of the 3 immediately preceding years of assessment, and

(ii) sustains a loss in the Covid-19 period.

(c) Where an individual to whom this subsection applies is, by virtue of subsection (6), chargeable to income tax in respect of profits or gains from farming in accordance with subsection (5), that individual may, on including a claim in that behalf with the return required under Chapter 3 of Part 41A for the year of assessment, elect to defer payment of the Covid-19 deferred tax.

(d) Where an individual duly elects in accordance with paragraph (c) in respect of a year of assessment, the Covid-19 deferred tax in respect of that year of assessment shall be payable in 4 equal instalments.

(e) The first instalment of the 4 instalments referred to in paragraph (d) shall be due and payable on or before the specified return date for the chargeable period of the year of assessment following the year of assessment in which the election, referred to in paragraph (c), is made and the remaining 3 instalments shall be due and payable respectively on or before each of the following 3 anniversaries of the date on which the first instalment was due and payable.”,

and

(iii) in subsection (8)(e), by substituting “deferred tax or Covid-19 deferred tax” for “deferred tax”.