Elections and the close company surcharge

Introduction

The Tax Appeals Commission recently ruled on an appeal (149TACD2024) concerning a Notice of Amended Assessment for Corporation Tax. The appeal was brought by a close company (the Appellant) regarding assessments for the years 2019 and 2020, totalling €396,000.

Background

The Appellant failed to file its corporation tax returns on time for the periods 2018, 2019, and 2020. The returns were eventually filed on July 29, 2022, but did not include the close company surcharge, as the Appellant elected for relief under section 434(3A) TCA 1997.

Key Issues

The central issue was whether the Appellant’s election for relief from the close company surcharge was valid, given the late filing of the returns. The interpretation of section 434(3A) TCA 1997 was crucial, particularly whether an election made in a late return could be considered valid.

The Appellant argued that section 434(3A) TCA 1997 does not specify a time limit for making the election and that the election should be valid despite the late filing. Revenue contended that the election was invalid because it was not included in a return filed on time, as required by Chapter 3 of Part 41A TCA 1997.

Commission’s Analysis

The Commission examined the statutory provisions and relevant case law, emphasizing the importance of approaches to statutory interpretation. It concluded that:

The election must be included with a return filed on or before the specified return date.
The Appellant’s late returns did not comply with this requirement, rendering the election invalid.

Determination

The Commission upheld the Notices of Amended Assessment, determining that the Appellant was liable for the close company surcharge.

Conclusion

This ruling underscores the importance of the timely filing corporation tax returns to avail of relief under section 434 (3A) TCA 1997. The decision highlights the strict interpretation of statutory provisions related to tax elections and the consequences of non-compliance.