# new start up companies corporation tax relief



## ninak (29 Sep 2010)

Hi, bit of advice needed. We have a start up co which we thought would qualify for the corporation tax 3 year exemption scheme that revenue have. We meet all the criteria except that two days before Christmas 2008 our first clients authorised the advance payment for work beginning in Jan 2009. This happened because of bank holidays and slow down over the Christmas.  As far as I can see we did not commence trade until 2009, which is what the criteria says. No wages were paid until end Jan 2009. A vat return was made for that payment under Nov/dec 2008 as we are on a cash receipts basis and the money came in in dec. 
Initially Revenue were saying all was ok and that we qualified for the scheme. I asked for a written confirmation of that as I did not want them turning around in 3 years telling us something different. I have just been told that they have had a meeting and we are now not eligible for the scheme as we traded in 2008! 
At this point we are wondering if we should disband this Co and start a new one so as to avail of the scheme? Our tax liability for last year was nil and this year is negligible. But next year there is a potential for a decent return, all going well.


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## T McGibney (29 Sep 2010)

ninak said:


> At this point we are wondering if we should disband this Co and start a new one so as to avail of the scheme?



If you do this, the new company will be barred from claiming the exemption, on the basis that a qualifying company cannot take over an existing trade previously carried on by another company or entity.


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## ninak (29 Sep 2010)

Thanks, thought Revenue would have that covered. Should I try and argue my case? It seems rather unfair to me. We did not do any work or pay wages etc until Jan 2009.


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## DB74 (29 Sep 2010)

I have mentioned this before on here as regards commencing to trade.

Revenue have no set criteria to determine when a company commences to trade and when it is merely preparing to trade.

It's a case of arguing your corner unfortunately


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## Nige (29 Sep 2010)

ask them to put in writing that you are refused the relief and then appeal it. Get your accountant to take care of the appeal to ensure all the technicalities are dealt with. You'll sometimes find that rather than go to Appeal, the Revenue will negotiate.


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## Paddy199 (30 Sep 2010)

Have you any losses to carry forward from the 1st year or have you used them in year 2?


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## ninak (30 Sep 2010)

No losses to carry forward. Think I will try fighting my case and look at an appeal.


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## BazFitz (30 Sep 2010)

What exactly happened during December 2008?  Did you raise an invoice?


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## papervalue (30 Sep 2010)

What date did you put on Tr2 for registration for corp tax, vat, paye/prsi?

What date did you open bank acount?

Was their many transactions on bank account before 31/12/08?- is it only the one lodgement or did you draw money?

Can you print a bank statement to use in appeal?

What date did first employee start from?

Can you get customer to back up your story in writing- How did customer account for it?


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## BazFitz (30 Sep 2010)

Also, what's the "downside" in terms of tax?  How much is the denial of this relief costing the company?


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## ninak (4 Oct 2010)

The Co was registered end of Oct 2008 which is fine as the relief applies to Co's set up after 18th Oct that year. 
The bank A/c was opened in Nov. There were no transactions on ac until 2 days before Christmas when a pre-payment for out first job, due to start in Jan after the holidays, came through. It was not due until Jan, but with Christmas holidays it was paid before rather than after. That was paid directly into our ac with a bank transfer. First wages paid in end of Jan. 
No work or trading done before jan 2009. We got word that we had secured a contract late dec that was due to start in Jan. I presume an invoice was raised with a date of end Dec 2008 and a payment due date of Jan 2009. 
A vat 3 return was made for that Nov/Dec with the payment that came through on the 23rd of Dec. This seems to be the sticking point with revenue. 
The downside with regards to tax is that next year we may have a better profit. Also, there is a real chance that Corp tax will go up. Any chance to get this relief could be a major help for our fledgling Co. 
I think myself that we are not going to get it. The Vat 3 return seems to be proof enough to revenue that we were trading before 2009 and they do not hear anything else said.


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## BazFitz (4 Oct 2010)

Unfortunately, I think your situation is clear cut.  You are not entitled to the relief because you've traded during 2008.  As you point out above, the November-December 2008 VAT return reflects sales.


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## Henrieta (6 Oct 2010)

I think DB74 makes the most important point here on when the company actually began to trade. As stated there is no actual criteria set down to determine this.

Revenue could argue that by sourcing/tendering work that this actually constituted trading on your behalf in 2008 and they probably would have a good point. On the other hand you could argue that the "work" that your company is actually involved in did not commence until Jan 2009 and you have proof in that wages were not paid until this point. Was there a contract/statement of works drawn up with customer to show what period the work would be carried on over? 

I would not place as much emphasis on the fact that you paid VAT in Nov/Dec 2008 as this was totally a consequence of the advance payment and would be common in certain parts of industry. To me the more important point is if Revenue consider the tendering/sourcing of work constitutes carrying on a trade or not. 

There was a Revenue Technical Service that responded to technical queries and I'm not sure if they are still in operation. You would probably need to submit a query such as this through an accountant as secure mail and passwords etc were required.


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## BazFitz (6 Oct 2010)

Presumably an invoice was raised?  Companies don't just pay other companies willy nilly for goods or services.  If an invoice has been raised and payment has been made during 2008, that's a very strong indication of trading activity.


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## ninak (6 Oct 2010)

It seems to all be boiling down to the invoice raised in late Dec. That coupled with the Vat 3 are what revenue are saying constitutes trading in 2008. I can see their point. As far as giving a start up Co a break and letting us be included in the scheme, revenue don't even entertain it. All black and white I'm afraid. Wondering if it's worth bothering with an appeal to be honest. Don't want to have to pay an accountant for the trouble.


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## T McGibney (7 Oct 2010)

ninak said:


> Don't want to have to pay an accountant for the trouble.



I think if you had engaged an accountant at the outset, this problem wouldn't have happened as they presumably would have advised you not to commence trading before the applicable date in order to preserve your entitlement to the relief. 

They would also presumably have advised you that the CT exemption is of very limited benefit to almost all small startup companies and that its benefits in most situations are illusory. Hence you are probably worrying about missing a tax relief that is not really worth the effort in the first instance.


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## Denisoftus (26 Nov 2010)

Didn't want to start a new thread, as my question relates to the corporation tax relief.

Let say individual A is a sole trader and wish to form a company. She's been self-employed for 3 years. She is doing the same business. If she starts the company in 2009, will she be eligible for relief? This 





> qualifying company cannot take over an existing trade previously carried on by another company or entity.


 troubles me. What revenue consider as a new trade? Should it be completly new business idea,not ever used by anyone else, if so, I find hard to believe there are many companies qualifing.

Cheers,


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## DB74 (26 Nov 2010)

Denisoftus said:


> Let say individual A is a sole trader and wish to form a company. She's been self-employed for 3 years. She is doing the same business. If she starts the company in 2009, will she be eligible for relief?


 
No because she is merely transferring her business from a sole trader to a ltd company




Denisoftus said:


> What revenue consider as a new trade? Should it be completly new business idea,not ever used by anyone else, if so, I find hard to believe there are many companies qualifing.


 
It just means a brand new set-up. It doesn't have to be an innovative idea.


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## Denisoftus (26 Nov 2010)

Thanks, it's never easy, isn't it?


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