Professional Services Withholding Tax (PSWT) General Instructions

Transcription

1 Income Tax, Capital Gains Tax and Corporation Tax Manual Part Professional Services Withholding Tax (PSWT) General Instructions Chapter 1 of Part 18 Taxes Consolidation Act 1997 Updated September 2014

2 Contents: PART 1 General Instructions. 3 PART 2 Documentation. 5 PART 3 Claims for Credit/Refund District Procedures etc. 8 PART 4 Interim Refunds and Interim Refunds in the case of Particular Hardship. 12 PART 5 Allocation of PSWT Credit Partnerships. 19 PART 6 Payments made to Medical Practitioners under a contract of insurance in respect of relevant medical expenses 21 Appendix Reference Material 22 2

3 PART 1 General Matters [18.1.4] Chapter 1 of Part 18 of the Taxes Consolidation Act 1997 provided, with effect from 6 June 1987, for the deduction at source of tax at the standard rate of income tax from relevant payments for professional services made to specified persons by accountable persons. 1.1 Accountable Persons Accountable persons are obliged to deduct withholding tax when making a payment within the scheme. Schedule 13 Taxes Consolidation Act 1997 contains a schedule of accountable persons. In general, accountable persons are public bodies, government agencies, semi-state companies etc. Regions dealing with such bodies should ensure that the body is listed in Schedule 13. Where such a body is not listed in Schedule 13 but is a subsidiary of an accountable person listed on Schedule 13, then that body is also an accountable person and is required to operate Professional Services Withholding Tax [PSWT] when making payments for professional services. A company is a subsidiary of another company if the subsidiary is resident in the State. The term subsidiary has the meaning assigned to it by section 155 of the Companies Act A company will also be an accountable person if it is a company resident in the State of which more than one accountable person are members if the accountable persons- control the composition of its board of directors hold more than half in nominal value of its equity share capital or hold more than half in nominal value of its shares carrying voting rights (other than voting rights which arise only in specified circumstances) 1.2 Specified Person A specified person in relation to a relevant payment means the person to whom that payment was made and with effect from 27 March 2013 includes payments made to a partnership trade. 1.3 Relevant Payment A relevant payment is a payment made by an accountable person in respect of a professional service. It is important to note that the professional service need not have been provided to the accountable person in order for it to be a relevant payment. Examples The Health Service Executive pays a doctor for services provided to a medical cardholder even though the medical service has been provided to the patient. Payments made by authorised health insurers to registered medical practitioner are relevant payments even though the service has been provided to the patient. 3

4 Ordinarily, where the employees of an accountable person, as part of their conditions of employment, are entitled to submit bills for expenses incurred, the employee would pay the service provider and the employer would reimburse the employee. Where, for ease of administration, the employer who is an accountable person makes the payment directly to the service provider rather than to the employee, such a payment is not subject to PSWT. However, where the payment arises because the employer, who is an accountable person, engaged the service provider to provide services to its employees, then such a payment is subject to PSWT. Examples When a Garda is transferred they may engage auctioneers, solicitors etc. Rather than pay these fees and seek a refund from the Department of Justice as employer, the Department of Justice pays the professional fees directly to the practitioner involved. The expenditure is incurred by the Garda and paid on his behalf by the department and is outside the scope of PSWT. A doctor is hired by a Government department to examine an employee. The Government department has engaged the doctor and has therefore incurred the expense which is therefore within the scope of PSWT Occasions when PSWT does not apply The following payments are treated, either by legislation or practice, as not being relevant payments for the purposes of PSWT (the excluded payments ): Payments that come within the scope of PAYE Payments that come within the scope of RCT Payments made by an accountable person to a charity that is exempt from tax Payments by one accountable person to another accountable person in certain circumstances Payments by a company which is an accountable person to their parent / subsidiary / sister company which is also an accountable person (see IT 61 at ) Accountable persons must operate withholding tax on all relevant payments unless the payments have been specifically excluded. In addition to those excluded payments outlined Revenue accept that withholding tax need not apply to a payment made abroad by a foreign branch/agency of an accountable person for a professional service provided abroad to the branch/agency by a specified person resident abroad (see also paragraph 4.1 and appendix 1of IT 61 at ). The provision of a Tax Clearance Certificate by a specified person does not negate the obligation on the accountable person to deduct PSWT. 4

5 PART 2 Documentation [18.1.4] 2.1 Introduction This section gives details of the forms used by accountable persons when making relevant payments. It also clarifies the approach to be adopted where forms F45 received, either in support of a claim for an interim refund / offset or when requested by Revenue for verification purposes in cases where credit PSWT is claimed, are not fully completed i.e. no signature/official stamp, specified person s tax reference number not included. 2.2 Form F45 A form F45 gives details of the amount of a relevant payment and of PSWT deducted together with the amount of any VAT charged. Accountable persons may use either a version which is completed manually or a continuous or laser stationery version of the form which is used with computerised systems (see Part 5 of IT61 at ). The manual form F45 is a two-part form and has a security number printed on both parts. Part 1 is given to the specified person. The accountable person retains part 2. Continuous stationery forms F45 are supplied by Revenue to accountable persons who wish to use them in conjunction with computerised systems. The continuous stationery form F45 is a one-part form which is given to the specified person. The accountable person retains a computer record of the details entered on form F45s issued. Laser stationery forms F45 are also available for use with computerised systems. These are not supplied by Revenue but are available from an approved supplier. See paragraph 4.3 of for contact details of the approved supplier of laser stationery. Laser stationery form F45 is also a one-page form which is given to the specified person. Again the accountable person retains a computer record of the details entered on forms F45 issued. Continuous or laser stationary versions of form F45 do not have security numbers printed on them. Revenue issue accountable persons who choose to use either of these versions of form F45 with a range of security numbers. The accountable person must input a security number, from the range supplied, in the space provided on the form. Where PSWT is deducted from a payment, a form F45 will be given to the specified person. Specified persons are required to provide the accountable person with their tax reference number. In the case of a partnership it is the responsibility of the precedent partner to provide the accountable person with the tax reference number of the partnership. Specified persons who are not resident in the State, or who do not have a permanent establishment or fixed base in the State, are required to supply their foreign tax reference number. In the case where an Irish tax reference number has been provided the accountable person can seek confirmation from the specified person or precedent partner in the case of a partnership, confirming that the tax reference number is correct. The accountable can also seek confirmation from Revenue that the Irish tax reference number provided in respect of a specified person or partnership is correct. 5

6 In responding to such enquiries from accountable persons Revenue staff should only confirm the validity of the tax reference number in question. They should not provide the accountable person with any further information relating to the specified person. Accountable persons must not issue form F45 where the specified person has failed to provide their tax reference number to the accountable person. 2.3 Completion and checking of Forms F45 All accountable persons have been given detailed instructions on the completion of forms F45 (see IT 61 at ). Each form (other than computer produced forms) must: be signed by the accountable person or an authorised official bear the accountable person's official date stamp and include the specified persons tax reference number. Computerised forms need not contain a signature or date stamp. 2.4 Form F45 not fully completed While forms F45 should not be rejected simply because they are not correctly signed and stamped, forms F45 received without the specified persons tax reference number should be returned to the accountable person with instruction to: contact the specified person to ascertain their tax reference number issue form F43 on receipt of the specified person s tax reference number original form F45 having been incorrect as it did not include the specified person s tax reference number. (a) If staff in Regions observe that a particular accountable person continually issues inadequately completed forms F45, the matter should be taken up with the accountable person to ensure they are aware of their obligations under Section 524 TCA If there is a doubt as to the authenticity of a form F45 and if considered appropriate it should be checked by means of a phone call to the accountable person before a repayment/credit is given. 2.5 Forms F43 Tax Briefing Issue 28 addressed a difficulty that arose in relation to the use of the form F43. The difficulty was that for the purposes of completing returns some specified persons or their agents were requesting accountable persons to issue a form F43 in respect of every form F45 referable to the tax year/accounting period. It appears such requests were being made because either: the specified person did not retain any of the forms F45, or the F43s were being used to check that none of the original forms F45 were missing. Such requests place a high and unnecessary administrative burden on the accountable person to whom they are made. In order to alleviate the burden on accountable persons the article in Issue 28 reminded practitioners that: 6

7 [18.1.4] forms F45 are valuable documents and should be retained carefully, and forms F43 are intended for use in exceptional circumstances only (i.e. where a form F45 was incorrect or was mislaid). The article advised practitioners that where forms F43 are requested in respect of numerous payments, the accountable person may refuse to issue same - the accountable person has already satisfied the obligation imposed by Section 524 TCA 1997 by the issue of a form F45 in relation to a payment. In addition, where specified persons or their agents need to make the check mentioned above, accountable persons may agree to issue a statement setting out the F45 details requested. However, any such statement issued by an accountable person is for the information of the specified person or his/her agent only. It is not to be accepted by Revenue for the purposes of PSWT credit. Key points to note: claims for interim refund or offset of PSWT can only be dealt with on receipt of forms F45, or forms F43 in replacement of the original forms F45, letters or statements issued by accountable persons which set out F45 details are not acceptable as an alternative to forms F45 or F43 in support of a claim for PSWT credit, and Forms F45 that do not include the specified person s tax reference number are to be returned to the accountable person with any attaching claim for repayment held until corrected form F43 is received. 7

8 PART 3 Claims for Credit/Refund - District Procedures etc. 3.1 General A taxpayer who has suffered PSWT is entitled to a credit of PSWT suffered against their final tax liability. Companies are taxed on the profits arising in an accounting period. In an accounting period they will receive credit for PSWT suffered on income taken into account in arriving at the profits for the same accounting period. Individuals assessable under Case I / II are taxed on the profits arising in a basis period (usually the accounting period which ends within that year of assessment). In a year of assessment they will receive credit for PSWT suffered on income taken into account in arriving at the profit for the basis period for that year of assessment. Example (i) A taxpayer makes up accounts for 12 months to 30 October On 10 January 2011 a payment from which PSWT was deducted was received. The payment was earned in May 2010 and was reflected in the accounts as turnover in that period, with the corresponding entry in debtors. (ii) (iii) If the taxpayer is a company, the company will be entitled to claim a credit for this PSWT in the CT1 for the period to 30 October If the taxpayer is an individual, they will be entitled to claim a credit for this PSWT in their Form 11 for the tax year The basis period for both their Case I profits and their PSWT credit is the 12 months to 30 October Where there is a gap between two basis periods that gap period is deemed, for the purposes of the PSWT credit, to be part of the next basis period. Where there is an overlap between two basis periods then that period of overlap is deemed to be part of the second basis period. That is, where one basis period does not follow the last basis period, for example on a change in accounting date, then the credit for PSWT falls into the second basis period only (see Tax Briefing 22 in relation to commencement and cessation). Example (i) An individual makes up his or her accounts for the 12 months to 31 May 2012 and then for the 14 months to 31 July 2013 then: The 12 months to 31 May 2012 is the first basis period The 12 months to 31 July 2013 is the second basis period. The 2 months from 1 June 2012 to 31 July 2012 is a gap between basis periods and credit for PSWT suffered on income taken into account in 8

9 arriving at the profit for this 2 month period is deemed to be part of the second basis period. [18.1.4] (ii) An individual makes up their accounts for the 12 months to 31 May 2012 and then for the 10 months to 31 March 2013 then: The 12 months to 31 May 2012 is the first basis period. The 12 months to 31 March 2013 is the second basis period. The 2 months from 1 April 2012 to 31 May 2012 is an overlap of two basis periods and credit for PSWT suffered on income taken into account in arriving at the profit for this 2 month period is deemed to be part of the second basis period. For taxpayers not taxable under Case I / II (e.g. those taxable under Case IV), credit is given for PSWT suffered in the year of assessment in which income derived from the relevant payment is assessed to tax. It is possible that the form F45 supporting a claim for credit will be for a date after the end of the accounting period / basis of assessment. Where an income tax payer has commenced trading, the PSWT suffered in the first year of business will not be given until the second tax year, unless the taxpayer qualifies for an interim refund (see Part 4). Completed forms 11 and forms CT 1 should include the full amount of PSWT credit due. The amount of any interim refund dealt with will automatically be deducted from the amount claimed. (See page 12 of Tax Briefing 56 July 2004) 3.2 PSWT deducted in error Where it is established that PSWT, which has been returned to the Collector- General, was deducted in error, the specified person can make a claim for a refund to the Revenue District dealing with their income tax affairs. Form(s) F45 and a letter from the accountable person stating that the service was not a professional service should support the claim. In such circumstances, repayment may be made whether or not the taxpayer has arrears of tax against which the repayment might otherwise be set Verification of forms F45/43 and refund procedure Operational Instruction No. 85 of 2006 advised staff and managers of the security features, safeguards and checks to be followed when dealing with refunds generally. Paragraph 3.4 of that instruction dealt with PSWT matters. Repayments selected for checking which arise from a tax credit for PSWT must be substantiated by the submission of forms F45 or forms F43 (in replacement of the original forms F45). Letters or statements issued by accountable persons that set out F45 details are not acceptable as an alternative to forms F45 or F43 in support of a claim for PSWT credit. When selecting cases for checking, officers at each level should give a high priority to cases with PSWT credit. 9

10 All officers should be aware that PSWT is a high-risk tax credit and there is potential for fictitious claims resulting in a repayment of some or all of the tax credit claimed on the return. While there is a particular high risk attaching to newly registered cases, the supporting documentation referred to above must be requested in all cases selected for checking. The request and subsequent verification of the supporting documentation should be recorded in the Work-Item detail screen in accordance with paragraph 3.5 of OI No. 85 of When the forms F45s / F43s are received they should be carefully examined to verify that they are authentic. If they appear suspect in any way they should be verified with the accountable person (preferably by telephone so as not to unnecessarily delay the repayment). Procedure in Processing District at the processing of PSWT repayment In summary, the checks to be followed in relation to repayments generally apply to PSWT repayments. Forms F45s, which contain any suspect features, should be checked with the particular accountable person at the time of processing (by phone as far as possible). While it would be expected that such cases would be rare, suspicions on the part of staff should not be disregarded, as the experience to date shows that most frauds are detected by vigilant staff. Examples of suspect features are: Generally, where details on the form F45 are unclear, appear to be incorrect or to have been changed (see Note 1)Suspect F45/F43 Security Number (see Note 2) Suspect Name Suspect PPS/Tax reference number Suspect address Notes: 1. Photocopies of forms must never be accepted in support of claims except in the case of claims made by partners where the copy is accompanied by the statement of apportionment issued by the precedent partner. 2. The manual form F45 has space for payments up to 1,000,000. In exceptional cases where a payment exceeds this amount, accountable persons may be advised to insert the amount of the payment and initial and stamp the form F45 where the amount has been entered. A form F45 (whether completed manually or using a computerised system) for a payment in excess of 1,000,000 should always be checked with the accountable person. 3. If necessary, Districts can check the allocation of particular security forms F43 and F45 or ranges of security numbers given to accountable persons by contacting Santry Warehouse 10

11 3.4 Non-Residents - Claim Forms [18.1.4] Non-residents who are not chargeable to tax in the State for the year in which PSWT is deducted may apply for repayment of PSWT deducted to International Claims Section at the address below: The Revenue Commissioners International Claims Section Government Offices Nenagh County Tipperary Tel: (ROI only) or (from outside Ireland) intclaims@revenue.ie Where a non-resident is chargeable to tax in the State for the period in which the PSWT is deducted, claims for credit, or interim refund of PSWT should be made to the Revenue office which deals with the tax affairs of the non-resident. In general, nonresidents are chargeable to tax in the State for the period in which the PSWT is deducted, if during that period they carry on business through a permanent establishment in the State. 3.5 Charities Enquiries from charities regarding claims for refunds of PSWT or in relation to claiming exemption from tax should be directed to Charities Section in the Collector- General s Division. Charities Section Collector General s Division Government Offices Nenagh County Tipperary Tel: (ROI only) (from outside Ireland) charities@revenue.ie 11

12 PART 4 Interim Refunds and Interim Refunds in the case of Particular Hardship 4.1 Interim Refunds (Section 527 TCA 1997) The provisions governing interim refunds cover three circumstances On-going business generally (see 4.3) Commencing business (see 4.4) Particular hardship (set out in detail in Statement of Practice IT/ 3/90) (see 4.5) 4. 2 Statement of Practice Interim Refunds Statement of Practice SP IT/3/90 sets out the procedures to be followed in dealing with applications for interim refunds of PSWT. That Statement of Practice is still in force. The following matters should be noted in particular: - 1. Subject to the Statement of Practice, the three preconditions set out in Section 527(2) of the TCA 1997 for the receipt of an interim refund must be carefully observed. These are that: (i) the profits of the previous period must be known, (ii) the tax for the previous period must have been paid, and (iii) forms F45 (or exceptionally forms F43) must accompany the claim. 2. Hardship claims made under Section 527(5) must be supported by appropriate documentation substantiating the claim. In this regard, each claim should be separately documented, although it will be a matter for the officer determining the claim to decide on the extent of documentation required. 3. Where a claim relates to one or more forms F45 which relate to relevant payments made after the end date of the basis period or accounting period in respect of which the refund claim is made, such forms F45 should only be brought into the refund calculations where the claimant has specifically stated that those relevant payments are being treated as income of the basis period or accounting period concerned. Example: A professional makes up accounts to 31 August annually. On 15 October 2011 he receives a relevant payment for services provided during the month of August The amount of the payment will be a debtor in the accounts to 31 August 2011 and, as such, is capable of being brought into the interim refund calculations for that period. 4.3 On-going Businesses Generally A person carrying on a trade or profession who suffers a deduction of tax in relation to that trade or profession may, if certain requirements are satisfied, claim an interim 12

13 refund for the accounting period or basis period to which the tax refers ["the firstmentioned period"]. [18.1.4] The requirements to be satisfied are that: (a) the profits of the accounting period or basis period immediately preceding "the first mentioned-period" have been finally determined, (b) the tax payable for the accounting period or for the year of assessment for which the profits referred to at (a) form the basis of assessment has been paid, and (c) necessary documentation has been submitted which in the case of a partnership should be in accordance with section 529A TCA The following example illustrates the operation of these requirements. Example Accounts of an individual are made up to 30 September each year. Liability for 2010 is based on accounts for year ended 30 September Profits for this period have been finalised and the resultant tax liability of 14,100 was covered by the payment of preliminary tax in A form F45 showing PSWT of 15,000 referring to tax deducted in August 2011 (i.e. year ended 30 September 2011, the "first-mentioned period") is submitted with an interim refund claim. The excess over the 14,100 i.e. 900 may be refunded subject to any restriction necessary for arrears of tax. Regarding the two requirements the following should be noted: (a) The profits of the accounting period or basis period prior to the first mentioned period" have been finally determined. Profits are finally determined when any assessments relating to the profits are final and conclusive. (b) The tax payable for the accounting period or year of assessment for which those profits form a basis of assessment has been paid. (i) The full amount of the tax payable on all income and not just the tax payable in respect of the trade or profession must be paid. An instalment arrangement should not be regarded as the payment of the tax until all the post-dated amounts have been paid. (ii) Fulfilment of this requirement is necessary even where the tax payable in respect of the preceding period or year is not yet due for payment. For instance in the above example, the full income tax payable in respect of the tax year 2010 would not be due until 31 October 2011, i.e. a balance over preliminary tax could have been due on that date. In such a situation, an interim refund could not be made for tax deducted in the basis period ended 30 September 2011 if the full tax for the year 2010 was not paid. (iii)where a person wishes to pay tax in advance of when it would normally be due to the Collector General, the interim repayment claim may then be dealt with. 13

14 (iv)the argument that the unpaid tax in question might be deducted from the interim refund claimed should not be entertained. It is intended that no interim refund will be made unless the relevant income tax or corporation tax for the previous period has been paid. The amount of the interim refund on any claim is the excess of the PSWT applicable to the accounting period or basis period referable to the claim ( the period of claim ) over the sum of the following. An amount equal to the tax payable in respect of the preceding accounting period or year of assessment related to the previous basis period. [This is taken to approximate to the likely final liability for the year 2011], Any tax which the claimant is liable to pay or remit at the time of claim, and Any PSWT for the period of claim already refunded. It should be noted that where the computation of the interim refund includes a restriction in respect of any tax, that restriction is for the purposes of the computation only and does not satisfy the outstanding liability. Therefore, no discharge or stop should be entered against that tax on account of the restriction in question. However, where the computation, which has included a restriction in respect of a tax results in a refund of PSWT, the claimant can request that the refund be offset against any tax, which he or she is liable to pay or remit at the time of the claim. 4.4 Interim Refund - Commencing Businesses An interim refund may also arise where a trade or profession is set up and commenced at the commencement of the first mentioned period. The inspector must make an estimate of each of the following in relation to that trade or profession in accordance with the information available and to the best of his/her knowledge and belief (Section 527(4) Taxes Consolidation Act 1997). In this paragraph gross income, means the total of all the amounts received or receivable taken into account in computing the profits or gains. See Section 527(6) Taxes Consolidation Act The matters requiring to be estimated are (a) The number of months or fractions of months in the accounting period or basis period or basis period relevant to the claim (the first mentioned period ) (P). Normally, this will be the first 12 months. It cannot be a period greater than 12 months, but may be less than 12 months. The applicant should be asked to state the date up to which the first accounts will be made. (b) The total of the relevant payments for the first mentioned period (A) (c) The total gross income of the trade or profession for the first mentioned period (B) 14

15 The fraction A / B will be the proportion of a claimant s gross income which will be receivable from accountable persons. In the early months of the business, inspectors will have to rely mainly on information supplied on this point by the claimant. As the months pass, the amounts actually earned, from commencement, will provide some guide to these proportions. (d) The amount laid out or expended wholly and exclusively for the purpose of the trade or profession (E) Apart from information from the claimant and other considerations mentioned in paragraph (c), inspectors might have regard to the proportions of such expenditure in other similar businesses. (e) The period covered by the claim (C) The Inspector should decide the period of claim by reference to the spread of the forms F45 included in the claim. The period of the first such claim would commence at the date of commencement of the trade; the period of each subsequent claim would commence at the end of the previous claim. There is to be no overlap. Wherever possible each period would be estimated to end at the end of a month, usually at the end of the month in which the latest form F45 included in the claim was issued. If a Revenue officer is satisfied that in the interval between that last month in the claim and the month in which the claim is lodged there were no further payments he/she may extend the claim period to include that interval. The aim should be to maximise the refund consistent with the security of State revenues. If, in a subsequent claim there are included forms F45 referable to a previous period, the refund due for that previous period may be recomputed and any further refund due be made. There should not be an estimate for a period which overlaps another period. It should not be overlooked, however, that the total of the periods covered by all such claims cannot exceed the period estimated at paragraph (a) above. In the overall, the estimation is the proportion of allowable expenditure which corresponds (I) to the proportion of income derived from relevant payments and (II) to the part of the first mentioned period covered by the claim. This is achieved by computing an amount determined by the formula E x A x C B P The result of the calculation should be rounded up to the nearest. The amount available for offset or for interim refund is the lesser of the following: (a) the standard rate of income tax of the amount computed in accordance with the above formula. 15

16 (b) the amount of the PSWT included in the claim for the period less any PSWT already refunded for that period. Example Profession commenced 1 May Forms F45 for August 2010 showing tax 400 deducted on fees 2,000 received. C is 4 i.e. number of months from commencement to 31 August Per applicant first accounts will be for year ended 30 April P is therefore 12. Following estimates made on basis of information furnished by applicant. A: 20,000 (estimated total of relevant payments) B: 60,000 (estimated total gross income) C: 10,000 (estimated total expenses) Repayment/offset is as follows: 10,000 x 20,000 x 4 = 20% = , (Note that the repayment /offset should not, of course, exceed the amount of tax deducted) 4.5 Interim Funds in Cases of Particular Hardship The Revenue Commissioners are empowered to waive one or more of the requirements of Section 527 in cases of particular hardship. The term particular hardship should not be interpreted in such a way as to limit its application to financial deprivation. Generally, it is to be interpreted so as to modify the general provisions concerning interim refunds for cases, who would normally come within those provisions but who, in some unusual and extraordinary circumstances, are excluded. It would be expected, therefore, that a claimant generally would not obtain the benefit of Section 527(5) continuously; having qualified in respect of a particular circumstance, the claimant would cease to qualify once that circumstance no longer obtained. Statement of Practice SP-IT/3/90 outlines a number of situations in which Revenue accept that particular hardship arises, and the relief which Revenue are prepared to allow in such cases. Where it is established that a claim to an interim refund comes within the terms of the Statement of Practice, such claims should be dealt with in accordance with the Statement of Practice. Claims which cannot be accepted on this basis, cases of doubt, or cases which do not fall within the terms of the Statement should be referred to the Regional Office. Particular Hardship Examples of circumstances in which claims on the grounds of particular hardship may be accepted are reproduced in the Statement of Practice and a number of further 16

17 situations in which such claims may be accepted are outlined. The examples given at paragraph 2.2 of the Statement are illustrative only, and should not be regarded as an exhaustive list of examples. The general procedures for dealing with such claims remain unchanged. Some of the circumstances in which a claim on the grounds of particular hardship may be accepted are: (a) Where the PSWT paid in the credit period for a year of assessment is subsequently in excess of the anticipated liability for that year of assessment, because of a onceoff or unusual reduction in the level of income [para 2.2 (iii) of the Statement of Practice], or (b) Where the PSWT paid in the credit period for a year of assessment is substantially in excess of the anticipated liability for that year of assessment due to a demonstrable permanent substantial reduction in the level of income [para 2.2 (iv) of the Statement of Practice], or (c) Where the income tax (net of PSWT credited) which is due in a period of claim, and is actually paid, combined with PSWT deducted in that period exceeds an amount arrived at by multiplying the person s income for that period by the higher rate of tax which applies for that period. [para 2.2 (v) of the Statement of Practice 1 Meaning of Income Particular note should be taken of paragraph 2.2(vi) of the Statement of Practice regarding the meaning of income/changes in income. In considering whether a claim on the grounds of particular hardship arises, the trading/professional/rental income to be taken into consideration is the income per the accounts. Accordingly, variations in income which result from exceptional tax relief (e.g. accelerated capital allowances) do not provide grounds for a claim to particular hardship under the Statement of Practice. Set-off of Withholding Tax in Cases of Particular Hardship The general scheme of PSWT provides that before a person can obtain an interim refund, the tax payable for the accounting period or year of assessment for which the previous year was the basis period must have been paid. Where a person claims particular hardship, and that claim is accepted the amount of any interim refund may be set-off against outstanding income/corporation tax liabilities, but only where the person consents to such set-off. If the person s consent is not received, the refund should not be made until the liability of the previous accounting period/year of assessment has been paid. 4.6 Interim Refund - Claim Forms Documentation to accompany claims Where a taxpayer has finalised his or her previous year s tax and has paid the previous year s liability in full then an application for an interim refund of PSWT may be made by submitting the relevant form F45s. 1 Following the reduction in the highest rate of income tax, the percentage specified in paragraphs 2.2(v) and 4 of the Statement of Practice is reduced from 53% to the higher rate of tax which applies for the year of claim (e.g. 41% for 2013) 17

18 A claim form [form F50] is available for completion by claimants. The form is not a statutory one but the information required thereon is necessary for the purposes of computing the interim refund. Where the necessary information and declaration is conveyed in a letter, this is acceptable. If the claimant does not give all the necessary information, a claim form F50 should be issued. Claims for interim refunds must be supported by forms F45. Districts should normally accept that forms F45 submitted in support of form F50 relate to the period stated on form F50, even if forms F45 show the payment as having been made after the end of that period. In cases where no form F50 accompanies a claim, the date of payment shown on forms F45 should be used in determining the period to which the payment is referable, unless forms F45 are accompanied by a covering letter stating that the payment is referable to an alternative period. A claim form signed by an agent may be accepted if all other aspects of the claim are in order. On receipt of a claim it should be checked to ensure that the number of forms F45 attached is as indicated on the claim form and that the total amount of income and appropriate tax on the forms F45 corresponds to the totals shown in the claim form. Any discrepancy should be clarified All claims for interim refunds should be accompanied by the relevant forms F45. The onus of establishing that particular hardship exists rests on the taxpayer, who should submit whatever documentation is necessary to prove the existence of such hardship. Where final accounts cannot be produced in support of a claim (for instance, because the taxpayer s accounting date has not passed, or has only recently passed), draft accounts or estimated accounts should be accepted for the purpose of calculating the amount of the refund only. Such accounts should be accompanied by a statement from the taxpayer or his/her accountant as to the nature of the particular hardship. Where the claim is made in the circumstances referred to in paragraph (c) under Particular Hardship above (higher rate rule), reasonable estimates of the taxpayers other income (Schedule E, Case III, etc.) should be accepted. 18

19 PART 5 Allocation of PSWT Credit - Partnerships [18.1.4] 5.1 Finance Act Section 29A Taxes Consolidation Act 1997 Finance Act 2013 introduced amendments to Chapter 1 Part 18 of the TCA 1997 which provides clarity regarding partnerships namely: individual partners of a partnership are specified persons, not the partnership itself. while it is the partners who are the specified person an accountable person can make relevant payments to either the partnership or to the individual partner within the partnership who provided the professional service. where the relevant payment is made to the partnership, the precedent partner must in turn provide each partner with a statement setting out the apportionment between the partners of the relevant payment and associated PSWT deducted together with a copy of the form F45 received from the accountable person. accountable persons cannot issue form F45 if they have not been provided with the specified person s tax reference number, or in the case of payments being made to a partnership, the partnership s tax reference number. In the case of a partnership it is the responsibility of the precedent partner to provide the accountable person with the partnership s tax reference number. 5.2 Pre Finance Act 2013 regime While accountable persons can now make relevant payments to either the partnership or the individual partner who provided the professional service, partnerships may wish to continue dealing with PSWT as they did pre Finance Act Section 528 Taxes Consolidation Act 1997 provides that where a form F45 refers to two or more persons, any necessary apportionment shall be made for the purposes of making a refund or set off. Normally the apportionment will be made in the same proportion as a like amount of profits would be apportioned between the persons concerned. Tax-Briefing, Issue 22 (June 1996) advises in relation to partnerships that, in exceptional circumstances consideration will be given to requests to have the credit for PSWT allocated on a basis other than on the strict legislative basis, e.g. where the strict basis would cause administrative difficulty to the partnership. The apportionments to be made under Section 528 Taxes Consolidation Act 1997 or in accordance with TB 22 should be agreed by the Revenue officer dealing with the tax affairs of the partnership (where a partnership is involved) or with the tax affairs of the group leader (where a group or consortium engaged in a joint venture is concerned). It is important to ensure that where credit for PSWT is allocated on an alternative basis, the amount credited/repaid does not exceed the amount that would have been credited/repaid if the strict basis had been applied. In addition, it is essential that all 19

20 partners in the partnership sign the undertaking that they will not seek credit or repayment of the tax on any basis other than that which has been agreed. [18.1.4] 20

21 PART 6 - Payments made to Medical Practitioners under a contract of insurance in respect of relevant medical expenses 6.1 Finance (No.2)Act Section 522 Taxes Consolidation Act 1997 Finance (No. 2) Act 2013 amended Chapter 1, Part 18 TCA 1997 in respect of payments made by authorised insurers for medical services provided by medical practitioners who are employees/office holders. This manual deals with claims for credit for PSWT where a payment is made in the name of an individual medical practitioner but the medical practitioner does not have beneficial entitlement to the payment and has received it in the capacity of an employee/office holder. 6.2 Background Historically, practitioners provided medical services in their capacity as self-employed individuals and this was reflected in a requirement under section 522 TCA 1997 that authorised insurers make payments for such medical services directly to the practitioner who provided the medical services. However, section 522 TCA 1997 was amended to provide that where the medical practitioner provided the medical services as an employee, then the authorised insurer must make the payment to the individual s employer. 6.3 Payments made up to and including 31 st December 2013 For payments made up to and including 31 st December 2013, Section 522 stipulated that, where under a contract of insurance, a claim in respect of relevant medical expenses is made to an authorised insurer, that insurer shall, subject to section 529A, discharge the claim by paying the benefit of the claim to the practitioner who provided the relevant services. 6.4 Payments made on or after 1 st January 2014 With effect from 1 st January 2014, an authorised medical insurer may make a payment of benefit arising from a claim under a contract of insurance to, as appropriate (a) the practitioner who provided the professional services or (b) where the practitioner who provided the professional services is an employee/office holder, the employer of the practitioner. 21

22 6.5 Entitlement to credit for PSWT deducted In applying section 522 TCA 1997 authorised insurers are not expected to enquire into the employment status of the practitioner who provided the service. If the service is invoiced by a company which claims that the practitioner provided the service in his/her capacity as an employee/office holder, then payment may be made to the company. By the same token, the fact that the payment is made to a company which claims to employ a practitioner will not of itself constitute evidence that an employer/employee relationship exists. Where the practitioner and the company which claims to be the employer are connected, then Revenue will consider all the facts in deciding whether to accept that (i) the private practice is being carried on by the medical practitioner in his or her personal capacity; or (ii) the private practice is being carried on by a company. If the true position is that of (i), Revenue s view is that the person chargeable to tax on the profits arising from that practice is the medical practitioner. Where such profits derive, in whole or in part, from payments from which PSWT has been deducted, the person so charged to tax may claim the credit for the PSWT deducted from those payments. If the true position is that of (ii), Revenue s view is that the person chargeable to tax on the profits arising from that practice is the company. Where such profits derive, in whole or in part, from payments from which PSWT has been deducted, the company may claim a credit for the PSWT deducted from those payments. If the PSWT Deduction Certificate is in the name of the employee or office holder of that company, the company may claim the credit for the PSWT so deducted. 22

23 Appendix Reference Material [18.1.4] A summary of the scheme relating to Professional Services Withholding Tax (PSWT) is contained in Leaflet IT 61 Revenue Guide to Professional Services Withholding Tax for Accountable Persons and Specified Persons (see ). Reference should also be made to Statement of Practice SP-IT/3/90 relating to Interim Refunds (see ) and to the following Tax Briefing articles: Issue 15 - July 1994 (page 4): PSWT Contracts performed abroad by Non- Residents Issue 16 - November 1994 (page 4): PSWT and Preliminary Tax Issue 18 - No (page 17-18): PSWT Revised Documentation Issue 22 - June 1996 (page 15): PSWT Commencement & Cessation Issue 23 - September 1996 (page 15): PSWT Apportionment of Credit Issue 28 - October 1997 (page 3): PSWT Documentation, form F43 Issue 52 - May 2003 (page 25): PSWT Late Payments in Commercial Transactions Issue 53 - August 2003 (page 20) PSWT Section 10 Finance Act 2003 Issue 56 - July 2004 (page 12) PSWT Credit Issue 60 August 2005 (page 22) PSWT Section 15 Finance Act 2005 (exempt payment between accountable persons & to exempt charitable persons) Tax Briefings No. 44 and 47 also addressed matters arising in relation to PSWT in the context of the changeover to the calendar tax year. 23