Budget 2008 - Corporation Tax

Preliminary tax payment arrangements for small companies

Small companies have the option of paying their preliminary tax at the lower rate of 90% of the final liability of the current accounting period or 100% of the final liability of the previous accounting period. The corporation tax liability threshold for treatment as a small company is being increased from €150,000 to €200,000. This will be effective from preliminary tax payments dates arising after 5 December 2007.

Preliminary Tax payment arrangements for New or Start-up Companies

Under the measure introduced in last year’s budget new or start-up companies with a corporation tax liability of €150,000 or less, for their first accounting period are not required to pay preliminary tax in respect of that first accounting period. They will, of course be required to pay their final CT liability for that accounting period at the same time as they are required to submit their tax returns (9 months after the end of the accounting period).

The Tax liability threshold under this arrangement for new or start-up companies is also being increased to €200,000 and this change will also be effective from preliminary tax payment dates arising after 5 December 2007.

International Financial Reporting Standards (IFRS) Rule

Transitional arrangements which relax the interest charge on underpaid preliminary corporation tax for companies in very specific circumstances for certain companies whose accounts are based on International Financial Reporting Standards (IFRS) will be changed in the Finance Bill 2008 so that these arrangements can be used on a permanent basis.

Tax Credit Scheme for Research and Development expenditure

The base year for expenditure which is used to calculate the qualifying incremental expenditure on research and development (R&D) under the tax credit scheme is being fixed at 2003 for a further four years to 2013. The change will provide an additional incentive for increased expenditure on R&D in future years and it will offer more certainty to industry in relation to the tax credit scheme.

It will be necessary to inform the European Commission about these changes from a State Aid perspective.