Section 22A Reduction of corporation tax liability in respect of certain trading income
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Amendments
Section 22A inserted by Finance Act 2000 section 76.
Note: This section has been superseded by the 12.5% rate (section 21) which came into effect on 1 January 2003.
(1) In this section-
"income from the sale of goods", in relation to an accounting period of a company, means such income as is income from the sale of those goods in the course of a trade carried on by the company for the purposes of a claim under section 448(3);
"net relevant trading income", in relation to an accounting period of a company, means the excess of the amount of relevant trading income of the company for the accounting period over the aggregate of the amounts of-
(a) relevant charges on income paid by the company in the accounting period, and
(b) any relevant trading loss incurred by the company in the accounting period;
"relevant charges on income", in relation to an accounting period of a company, means the charges on income paid by the company in the accounting period wholly and exclusively for the purposes of a trade carried on by the company other than so much of those charges as are-
(a) charges on income paid for the purposes of the sale of goods within the meaning of section 454, or
(b) charges on income paid for the purposes of an excepted trade within the meaning of section 21A;
"relevant trading income", in relation to an accounting period of a company, means the trading income of the company for the accounting period (not being income chargeable to tax under Case III of Schedule D) other than so much of that income as is-
(a) income from the sale of goods, or
(b) income of an excepted trade within the meaning of section 21A;
"relevant trading loss", in relation to an accounting period of a company, means a loss incurred in the accounting period in a trade carried on by the company other than so much of the loss as is-
(i) a loss from the sale of goods within the meaning of section 455, or
(ii) a loss incurred in an excepted trade within the meaning of section 21A;
"trading income", in relation to an accounting period of a company, means the income which is to be included in respect of a trade or trades in the total profits of the company for the accounting period as reduced by the amount of any loss set off against that income under section 396(1).
How did I qualify for the reduced rate of corporation tax?
(1) Your company's trading income, if below the limit mentioned in (2), may qualify for a reduction in corporation tax. The part that may qualify (net relevant trading income), is calculated net of any current loss (relevant trading loss), and curren...
(2) Subject to subsections (7) and (8), where in any accounting period ending on or after 1 January 2000 the net relevant trading income of a company does not exceed the upper relevant maximum amount, then the corporation tax charged on the company for that accounting period shall be reduced-
(a) where the net relevant trading income of the company does not exceed the lower relevant maximum amount, by such amount as will secure that the corporation tax charged on the company for the accounting period does not exceed the corporation tax which, apart from this section, would have been charged on the company for the accounting period if-
(i) in section 21 for paragraphs (c) to (f) of subsection (1) there were substituted the following paragraph:
"(c) 12.5 per cent for the financial year 2000 and each subsequent financial year.",
and
(ii) in section 448 for paragraphs (c) to (f) of subsection (2) there were substituted the following paragraph:
"(c) by one-fifth, in so far as it is corporation tax charged on profits which under section 26(3) are apportioned to the financial year 2000 or any subsequent financial year,",
and
(b) where the net relevant trading income of the company exceeds the lower relevant maximum amount, by a sum equal to-
[(i) as respects an accounting period falling within the financial year 2001, 30 per cent, and
(ii) as respects an accounting period falling within the financial year, 2002, 14 per cent,]1
of the excess of the upper relevant maximum amount over the net relevant trading income for the accounting period.
Amendments
1 Para (b)(i)-(ii) substituted by Finance Act 2001 section 83(1)(a) for 2001 and later tax years.
(3) The lower and upper relevant maximum amounts mentioned in subsection (2) shall be determined as follows:
(a) where the company has no associated company in the accounting period those amounts are [€254,000]1 and [€254,000]1, respectively,
(b) where the company has one or more associated companies in the accounting period, the lower relevant maximum amount is [€254,000]1 divided by one plus the number of those associated companies and the upper relevant maximum amount is [€254,000]1 divided by one plus the number of those associated companies.
Amendments
1 Substituted by Finance Act 2001 section 83(1)(b)(i) for 2002 and later tax years.
(4)(a) In this subsection "control" shall be construed in accordance with section 432.
(b) In applying this section to any accounting period of a company, an associated company which has no net relevant trading income for that accounting period (or, if an associated company during part only of that accounting period, for that part of that accounting period) shall be disregarded and, for the purposes of this section, a company shall be treated as an "associated company" of another company at a given time if at that time one of the two has control of the other or both are under the control of the same person or persons.
(5) In determining how many associated companies a company has in an accounting period or whether a company has an associated company in an accounting period, an associated company shall be counted even if it was an associated company for part only of the accounting period, and two or more associated companies shall be counted even if they were associated companies for different parts of the accounting period.
(6) For an accounting period of less than 12 months the relevant maximum amounts determined in accordance with subsection (3) shall be proportionately reduced.
(7)(a) Where, in the case of a company which has one or more associated companies in an accounting period-
(i) the accounting period of the company ends on a date on which accounting periods of all of the associated companies end, and
(ii) the company and all of the associated companies jointly elect in writing that this subsection shall apply,
then-
(I) the relief under subsection (2) shall be computed as if, in relation to the accounting period, the company and all of the associated companies were a single company (with no associated companies) with an accounting period ending on that date and beginning at the earliest date on which the accounting period of the company, or of any of the associated companies, begins, and
(II) the relief as so computed shall be allocated to the accounting period of the company and to the accounting periods of its associated companies in such manner as is specified in the election, and the amount so allocated to a company shall be deemed to be the relief under this section in relation to the accounting period of the company.
(b) Notwithstanding paragraph (a)-
(i) the aggregate of amounts allocated under subparagraph (II) of that paragraph for an accounting period shall not exceed the relief computed under subparagraph (I) of that paragraph, and
(ii) the amount allocated to an accounting period of a company shall not exceed the amount which would have been the relief in relation to the accounting period if the company had no associated companies in the accounting period.
Can my company and its associates allocate the reduction in the upper and lower limits?
(7) If your company and all of its associated companies have accounting periods ending on the same date, they may elect jointly, in writing, to have the lower and upper limits calculated as if all the associated companies were one company and to allo...
(8)(a) Subject to paragraph (b), where, in the case of a company which has one or more associated companies in an accounting period, the end of the accounting period of the company and the end of an accounting period of each of its associated companies do not coincide-
(i) subsection (7) shall apply as respects any period (in this subsection referred to as a "relevant period") which falls into the accounting period of the company and an accounting period of each of the associated companies as if the relevant period were an accounting period of the company and of the associated companies,
(ii) the relief allocated to any company in respect of a relevant period shall be deemed to be the relief in relation to that period, and
(iii) where an amount of relief has been allocated to a company in respect of a relevant period falling into an accounting period of the company, the relief for the accounting period of the company shall be the aggregate of-
(I) any relief in relation to relevant periods falling into the accounting period, and
(II) the amounts which would be the relief in relation to any periods (which are not relevant periods) within the accounting period if each of those periods was treated as an accounting period.
(b) The relief under paragraph (a) in relation to an accounting period of a company shall not exceed the amount which would be the relief in relation to the accounting period if the company had no associated companies in the accounting period.
What happens if my company and its associates have different accounting periods?
(8) If your company and its associated company do not have the same accounting period end date, you may jointly elect as regards the common parts of your accounting periods (the relevant period) to allocate the limits as you wish....
(9) For the purposes of this section where an accounting period of a company begins before 1 January of a financial year and ends on or after that date, it shall be divided into 2 parts, one beginning on the date on which the accounting period begins and ending on 31 December of the preceding financial year and the other beginning on 1 January of the financial year and ending on the date on which the accounting period ends, and both parts shall be treated as if they were separate accounting periods of the company.
What happens if my accounting period straddles 1 January?
(9) In calculating the relevant limits, if your accounting period straddles 1 January (i.e., a financial year), it is split into two accounting periods, one ending on 31 December and one beginning on 1 January and ending on the accounting period end ...
(10)(a) A company shall include in the return required to be delivered under section 951-
(i) a statement specifying-
(I) the amount of relief to be given to it under this section, and
(II) the number of companies which are its associated companies in relation to the accounting period,
and
(ii) a copy of any election made under subsection (7).
(b) A company which has specified an amount under paragraph (a) shall not be entitled to alter the amount so specified.
(11) Subsection (2) of section 21A shall apply for the purposes of this section.
What if my company carries on excepted operations?
(11) If your company carries on a trade that consists partly of excepted operations (these are listed in section 21A(1)) and partly of other activities, both are to be treated as two separate trades. The sales and expenses of the combined trade must ...
