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Amendment of section 76A of Principal Act (computation of profits or gains of a company - accounting standards)
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22. (1) Section 76A of the Principal Act is amended by inserting the following after subsection (2):
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“(3) (a) In this subsection—
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(i)‘accounting policy’, ‘a change in accounting policy’, ‘accounting standard’, ‘retrospective’ and ‘opening reserves’ shall be construed in accordance with generally accepted accounting practice;
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(ii)‘relevant period’ means the accounting period beginning on the first day of the period of account in which the change in accounting policy, referred to in paragraph (b), is adopted for the first time.
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(b) This subsection shall apply to a change in accounting policy other than on the adoption of—
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(i) an accounting standard for the first time, or
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(ii) an amendment of an accounting standard for the first time.
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(c) Subject to the Tax Acts, an amount representing the retrospective effect of a change in accounting policy which is recognised in opening reserves (howsoever designated) for a period of account in accordance with generally accepted accounting practice shall be taxable or deductible, as the case may be, in computing the profits or gains of a company for the relevant period for the purposes of Case I or II of Schedule D.
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(d) An amount shall not be regarded by virtue of paragraph (c) as deductible in computing the profits or gains of a company for the relevant period for the purposes of Case I or II of Schedule D to the extent that—
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(i) a deduction has been made in respect of that amount in computing such profits or gains for a previous accounting period, or
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(ii) the company has benefited from a tax relief under any provision in respect of that amount for a previous accounting period.
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(e) An amount shall not be regarded by virtue of paragraph (c) as taxable in computing the profits or gains of a company for the relevant period for the purposes of Case I or II of Schedule D to the extent that the amount was treated as taxable in computing such profits or gains for a previous accounting period.
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(f) References to profits or gains in paragraphs (c), (d) and (e) include references to losses.
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(4) (a) In this subsection—
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(i)‘accounting standard’, ‘retrospective’ and ‘opening reserves’ shall be construed in accordance with generally accepted accounting practice;
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(ii)‘relevant period’ means the accounting period beginning on the first day of the period of account in which the accounting standard, referred to in paragraph (b), is adopted for the first time;
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(iii)‘relevant amount’ means the amount representing the retrospective effect of adopting an accounting standard as computed in accordance with generally accepted accounting practice as adjusted to satisfy the requirements of paragraphs (d) and (e).
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(b) This subsection shall apply where—
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(i) an accounting standard is adopted for the first time and subsection (2) does not apply, or
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(ii) an amendment of an accounting standard is adopted for the first time,
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and references in this subsection to adopting an accounting standard for the first time shall be construed as including references to adopting an amendment of an accounting standard for the first time.
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(c) Subject to the Tax Acts, an amount representing the retrospective effect of adopting an accounting standard which is recognised in opening reserves (howsoever designated) for a period of account in accordance with generally accepted accounting practice shall be taxable or deductible, as the case may be, in computing the profits or gains of a company for the purposes of Case I or II of Schedule D.
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(d) An amount shall not be regarded by virtue of paragraph (c) as deductible in computing the profits or gains of a company for an accounting period for the purposes of Case I or II of Schedule D to the extent that—
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(i) a deduction has been made in respect of that amount in computing such profits or gains for a previous accounting period, or
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(ii) the company has benefited from a tax relief under any provision in respect of that amount for a previous accounting period.
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(e) An amount shall not be regarded by virtue of paragraph (c) as taxable in computing the profits or gains of a company for an accounting period for the purposes of Case I or II of Schedule D to the extent that the amount was treated as taxable in computing such profits or gains for a previous accounting period.
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(f) References to profits or gains in paragraphs (c), (d) and (e) include references to losses.
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(g) Subject to the Tax Acts, the relevant amount shall neither be taxable nor deductible, as the case may be, for the relevant period but instead—
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(i) a part of the relevant amount shall be taxable or deductible, as the case may be, for each accounting period falling wholly or partly within the period of 5 years beginning at the commencement of the relevant period,
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(ii) the part of the relevant amount which shall be taxable or deductible for any such accounting period shall be such amount as bears to the relevant amount the same proportion as the length of the accounting period, or the part of the accounting period falling within the period of 5 years, bears to 5 years, and
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(iii) where any accounting period referred to in subparagraph (ii) is the last accounting period in which the company carried on a trade or profession, then such part of the relevant amount as is required to ensure that the whole of the relevant amount is accounted for shall be taxable or deductible, as the case may be, for that accounting period.
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(5) (a) In this subsection—
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(i) ‘material error’, ‘fundamental error’, ‘retrospective’ and ‘opening reserves’ shall be construed in accordance with generally accepted accounting practice;
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(ii) ‘relevant amount’ means the amount representing the correction of an error which is taxable or deductible, as the case may be, by virtue of paragraphs (c) or (d) as adjusted to satisfy the requirements of paragraphs (e) and (f);
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(iii) ‘relevant period’ means the accounting period beginning on the first day of the period of account in which the error, referred to in paragraph (b), is corrected for the first time.
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(b) This subsection shall apply where a company’s accounts include the correction of an error.
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(c) Subject to the Tax Acts, an amount representing the retrospective effect of correcting either a material error or a fundamental error which is recognised in opening reserves (howsoever designated) for a period of account in accordance with generally accepted accounting practice shall be taxable or deductible, as the case may be, in computing the profits or gains of a company for the purposes of Case I or II of Schedule D.
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(d) Subject to the Tax Acts, an amount representing the effect of correcting an error which is neither a material error nor a fundamental error and which is included in the profits of a company for a period of account as computed in accordance with generally accepted accounting practice shall be taxable or deductible, as the case may be, in computing the profits or gains of that company for the purposes of Case I or II of Schedule D.
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(e) An amount shall not be regarded by virtue of paragraphs (c) and (d) as deductible in computing the profits or gains of a company for an accounting period for the purposes of Case I or II of Schedule D to the extent that—
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(i) a deduction has been made in respect of that amount in computing such profits or gains for a previous accounting period, or
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(ii) the company has benefited from a tax relief under any provision in respect of that amount for a previous accounting period.
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(f) An amount shall not be regarded by virtue of paragraphs (c) and (d) as taxable in computing the profits or gains of a company for an accounting period for the purposes of Case I or II of Schedule D to the extent that the amount was treated as taxable in computing such profits or gains for a previous accounting period.
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(g) References to profits or gains in paragraphs (c), (d), (e) and (f) include references to losses.
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(h) Subject to the Tax Acts, the relevant amount shall neither be taxable nor deductible, as the case may be, for the relevant period but instead—
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(i) where any part of the relevant amount relates to the relevant period, then that part of the relevant amount shall be taxable or deductible, as the case may be, for the relevant period,
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(ii) where any part of the relevant amount relates to an accounting period which commenced on or after 1 January 2013, then the return and self assessment for that accounting period shall be amended in accordance with section 959V to correct that part of the relevant amount, and
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(iii) where any part of the relevant amount relates to an accounting period which commenced before 1 January 2013, then the return for that accounting period shall be amended to correct that part of the relevant amount and for this purpose section 959V shall apply to such an amendment as if—
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(I) subsections (2) and (4) of that section shall not apply,
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(II) references in that section to ‘return and self assessment’, ‘return and a self assessment’, ‘return and the self assessment’ and ‘return or self assessment’ were references to ‘return’, and
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(III) the reference in that section to section 959Z was a reference to section 956.”.
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(2) (a) This section applies as respects accounting periods beginning on or after the date of the passing of this Act.
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(b) Where a company so notifies the Revenue Commissioners in writing on or before the specified return date for the accounting period (within the meaning of section 959A), that company may elect that the provisions of this section shall apply.
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