Revenue has confirmed that the extended ROS Pay and File deadline is Wednesday, 17th November 2021.
For self assessment Income Taxpayers who file their 2020 Form 11 Tax Return and make the appropriate payment through the Revenue Online System in relation to (i) Preliminary Tax for 2021 and/or (ii) the balance of Income Tax due for 2020, the filing date has been extended to Wednesday, 17th November 2021.
This extended deadline will also apply to CAT returns and appropriate payments made through ROS for beneficiaries who receive gifts and/or inheritances with valuation dates in the year ended 31st August 2021.
To qualify for the extension, taxpayers must pay and file through the ROS system.
In situations where only one of these actions is completed through the Revenue Online System, the extension will not apply. As a result, both the submission of tax returns and relevant payments must be made on or before 31st October 2021.
Revenue published Tax and Duty Manual Part 29-02-03 – Research and Development (R&D) Tax Credit today.
These updated guidelines clarify Revenue’s treatment of rental expenditure as well as including information on the treatment of subsidies received under (i) the Temporary Wage Subsidy Scheme (TWSS) and (ii) the Employment Wage Subsidy Scheme (EWSS).
According to previous guidance material on this matter issued on 1st July 2020 Revenue’s position was that “rent is expenditure on a building or structure and is excluded from being expenditure on research and development by section 766(1)(a) TCA 1997”.
Since then, Revenue’s position has been the source of continuous discussion and debate with many disagreeing with Revenue’s interpretation of the treatment of rent in relation to R&D claims.
Clarity had been sought from Revenue with regards to their position on rent in relation to both historic and new claims for Research and Development tax relief.
In this latest update, Revenue has clarified that rent will qualify in such circumstances where “the expenditure is incurred wholly and exclusively in the carrying on of the R&D activities.”
According to Paragraph 4.2 of the updated Revenue Guidance Manual:
“In many cases expenditure incurred on renting a space or facility, which is used by a company to carry on an R&D activity, may be expenditure that is incurred “for the purposes of”, or “in connection with”, the R&D activity but will not constitute expenditure incurred wholly and exclusively in the carrying on of the R&D activity. The eligibility of rental expenditure incurred by a company will relate to the extent to which it is incurred wholly and exclusively in the carrying on of the R&D activities. Where the nature of the rented space or facility is such that it is integral to the carrying on of the R&D activity itself then it is likely that the rent can be shown to be more than merely “for the purposes of” or “in connection with” the R&D activity.”
Therefore, it is possible for rental expenditure to be included as part of an R&D tax relief claim but only where that rented building is deemed to be integral to the carrying on of R&D activities. According to Revenue’s guidance material, an example of a rental expense that may be considered qualifying expenditure might relate to the rental of a specialized laboratory used solely for the purposes of carrying out R&D activities. This is contrasted with the rental of office space necessary to house an R&D team, but which is not deemed to be integral to the actual R&D activity. In this case, this rent would not be treated as eligible expenditure.
Revenue have confirmed that this position will only apply for accounting periods commencing on or after 1st July 2020.
Revenue’s Manual has also been updated to include:
For further information, please follow the link: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-29/29-02-03.pdf
As part of the Budget 2021, the Chancellor, Rishi Sunak, has provided for two temporary first-year capital allowances: (i) the Super Deduction and (ii) the Special Rate allowance, to apply over the next two years to boost investment and productivity levels in the UK economy.
For expenditure incurred between 1st April 2021 and 31st March 2023, companies can claim a Super Deduction in the form of a first-year relief of 130% on new plant and machinery fixed assets. This Super Deduction will apply to capital expenditure on “main pool” plant and machinery incurred by companies between 1st April 2021 and 31st March 2023, i.e. on plant and machinery that would usually qualify for 18% writing down allowances on a reducing balance basis. Remember, the Super Deduction is only for companies and cannot be claimed by sole traders or in professional partnerships.
Also, it is not available for items with a long life i.e. more than 25 years, or integral features within a building, or solar panels otherwise known as special rate pool items.
In summary, if a company spends £10,000 on qualifying items of plant and machinery within the specified timeframe, it will be able to reduce its taxable profits by £13,000. It is important to keep in mind that currently the company may be in a position to claim a 100% deduction using the Annual Investment Allowance, therefore, by availing of the Super Deduction Allowance the company will receive an additional benefit of 30% of the qualifying expenditure.
Examples of what might qualify include:
The Special Rate allowance provides relief at 50% of the qualifying cost in the first year. The balance then returns to the normal special rate pool to be written down at the usual 6% rate on a reducing balance basis in future years.
The ‘SR allowance’ covers new plant and machinery including integral features in a building and long life assets. Special rate expenditure broadly includes the following:
The following restrictions, however, apply:
The £1 million rate of the Annual Investment Allowance will be extended to 31st December 2021. From 1st January 2022, however, it is expected to revert to the previous limit of £200,000. This allowance provides relief of 100% on expenditure qualifying for capital allowances in the tax year of assessment in which the expenditure is actually incurred.
It is important to keep in mind that a company cannot claim the Annual Investment Allowance as well as the Super Deduction on the same amount of qualifying expenditure. The Annual Investment Allowance should be considered in situations where the Super Deduction is not available including the following three scenarios:
For all companies in a position to claim it, the Super Deduction will be more financially beneficial than claiming the Annual Investment Allowance with regard to main pool asset purchases.
For smaller companies it may be beneficial to claim the Annual Investment Allowance rather than the Special Rate Allowance on relevant assets, except where the total expenditure incurred on special rate pool assets exceeds the threshold amount of £1m.
Unlike the Annual Investment Allowance, there is no limit on the amount of capital investment that can qualify for either (i) the Super Deduction or (ii) the Special Rate allowance. Therefore, there are clear incentives for businesses to bring forward their investment plans to take advantage of these first year allowances.
When an asset on which a Super Deduction or Special Rate Allowance was claimed is disposed of, the consideration will be subject to a balancing charge. In other words, as the first year allowances are not pooled for capital allowances purposes, the proceeds from the disposal of relevant qualifying assets will be treated as taxable income.
If the disposal of the assets, on which a Super Deduction was previously claimed, occurs in a chargeable period that ends on or before 31st March 2023, the balancing charge will be equal to the disposal value multiplied by the relevant factor of 1.3 i.e. 130% of the sales proceeds. If, however, the disposal occurs on or after 1st April 2023 then the balancing charge will equal the actual sales consideration.
If the chargeable period straddles 1st April 2023 (i.e. where a chargeable period commences before 1 April 2023 and the disposal takes place after 1 April 2023) then the relevant factor is apportioned based on the number of days before 1st April 2023.
Similar rules apply to the 50% Special Rate Allowance.
Finally, if the full deduction cannot be used by the business for offset against its taxable profits then an allowable loss will be generated. This can: