Income Tax death

JansheerKahn

Mr A Case 1 sole trade for 20 years dies on 1 March in a year of assessment.
A specific provision in the accounts of €200,000 which has obviously reduced tax year on year as it was incrementally provided for over a number of years (bona fide provision and would stand up to scrutiny).
On death, in the cessation accounts, is this provision wrote back for tax purposes or what happens?

Allinall

JansheerKahn wrote: »

Mr A Case 1 sole trade for 20 years dies on 1 March in a year of assessment.
A specific provision in the accounts of €200,000 which has obviously reduced tax year on year as it was incrementally provided for over a number of years (bona fide provision and would stand up to scrutiny).
On death, in the cessation accounts, is this provision wrote back for tax purposes or what happens?

Provision for what?

JansheerKahn

Allinall wrote: »

Provision for what?

Doesnt matter - take it as allowable for tax. A provision for a cost that is w & e for trade and will crystalise at a future date

Allinall

JansheerKahn wrote: »

Doesnt matter - take it as allowable for tax. A provision for a cost that is w & e for trade and will crystalise at a future date

It absolutely matters.

Provisions are generally not allowed for tax purposes. Expenses need to be incurred. Eg. provision for bad debts is not allowable.

JansheerKahn

Allinall wrote: »

It absolutely matters.

Provisions are generally not allowed for tax purposes. Expenses need to be incurred. Eg. provision for bad debts is not allowable.

They are if specific. Like i said this is allowable.

marizpan

Is Mr A married?
Will the spouse take the case l after death?
I would have thought that the specific provision would crystallise on cessation for tax purposes, as that should reflect reality

Synode

How can a provision be incrementally provided for but then not crystallise. Doesn't make much sense to me. If your providing for something, it should happen soon after. Otherwise it's not allowable

JansheerKahn

Synode wrote: »

How can a provision be incrementally provided for but then not crystallise. Doesn't make much sense to me. If your providing for something, it should happen soon after. Otherwise it's not allowable

Very common commercially, for example providing for restoration of land after a quarry reaches end of useful life. Could be 30 years in future. You would provide annually to match revenues with costs.

JansheerKahn

marizpan wrote: »

Is Mr A married?
Will the spouse take the case l after death?
I would have thought that the specific provision would crystallise on cessation for tax purposes, as that should reflect reality

Not married so no Revenue concession applicable.
Presume intestate and Succession Act applies so passing to children and thus full cessation.
What legislative provision would dictate the provision be wrote back - Section 81?

Synode

JansheerKahn wrote: »

Very common commercially, for example providing for restoration of land after a quarry reaches end of useful life. Could be 30 years in future. You would provide annually to match revenues with costs.

In that case, once the event is no longer likely to occur (which I'm assuming in this case) then the provision should reverse

Marcusm

In the case of a quarry it might be sold with a sinking fund representing the accumulated dilapidations provision. This would be a crystallisation if the accumulated provision for accounting purposes. This would be the starting point for the Sch d case I computation.