Prelim CT

Heisenburg81

Say a company has losses forward in a prior year and fully shelters CT with these losses.
Can the company still elect to base preliminary CT for the subsequent year on 100% of the prior year (which is nil due to the losses) even though there is a 100% likelihood of taxable profits in that subsequent year and no remaining losses forward.
Section 959AN TCA states that a person must pay the preliminary tax that in that persons opinion is "likely" to arise.
The options of 90% or 100% in Section 959AR TCA seem to override the above and the 100% of the prior year is to be calculated after all credits the company is entitled to which would surely include losses.

Just wondering if there is anything funny to be wary of in a circumstance like this where the company directors know there will be profits or if the 100% of the prior year can be used thereby giving preliminary CT of nil.
I know it is only delaying the payment of tax but where seasonal cashflow is present it could be vital.

selfbuild17

Do you think that a person looking at your accounts for the year to date could reasonably assume that you will not return a profit at year end? If it’s clear that there has been a turnaround in your business since last year, you’d have difficulty arguing that you thought the business wasn’t profitable in the event of an audit.

Heisenburg81

selfbuild17 wrote: »

Do you think that a person looking at your accounts for the year to date could reasonably assume that you will not return a profit at year end? If it’s clear that there has been a turnaround in your business since last year, you’d have difficulty arguing that you thought the business wasn’t profitable in the event of an audit.

Yes but the question is;

Despite there being a likelihood of profits in the current year does the option to base it on 100% of the CT payable for prior year still apply, or is there a Revenue Precedent that this doesn't apply where losses were the reason there was no CT in prior year.

thegolfer

It applies.

The 100% is allowed, based on prior year liability, even though losses forward there to wipe out present year losses.

If you choose the 90% option, and there is a shortfall in estimated tax, then there can be issues, as you have gone with the estimated basis. Interest will apply from 23 November, assuming a December year end.