Can anyone help with this query? If a company has a large amount of money on deposit (say €1million) and is earning interest, can it receive this interest gross (without deduction of DIRT) and then at its year end pay over the DIRT? As the figures are quite substantial the benefits of having the gross interest on deposit for a full year are obvious.
Yes it can receive the interest income gross of DIRT.
The company is then subject to corporation tax at the higher rate of 25% on the interest income (unless it's capital held as a regulatory requirement or capital integral to the trade in which case it should be subject to the 12.5% rate of corporation tax).
The question of preliminary corporation tax depends on whether the company is a small or large company for corporation tax purposes (i.e. whether its previous corporation tax liability was less or more than €200,000 (for a full year).
The "benefit" in receiving interest without the deduction of DIRT is merely a timing/cash flow benefit. Say the company's tax adjusted trading profit for an accounting year is €800,000 and the company is also in receipt of passive interest income of €150,000 which was subject to DIRT (now 25%). The company's corporation tax liability will be €100,000 (i.e. €100,000 + €50,000 - €50,000). So it's preliminary corporation tax liability for the following accounting year could be based on 100% of this liability, i.e. €100,000. If the DIRT was not deducted, the company's CT liability would now be €150,000. It's PT liability could be €150,000 but the company has received €200,000 rather than €150,000 during the course of the year. It gets €50,000 "extra" up front but then pays it back out as PT 10 months and 21/23 days into the accounting year (or in two tranches for a large company).