On 15th April 2020 the Government announced a suite of new measures for SMEs to provide relief during the COVID 19 pandemic.
Amongst these measures were three (3) tax-related measures:
Greater flexibility for Taxpayers in respect of statutory deadlines
- In essence, IRD will be given discretionary powers to grant an extension to due dates and time frames such as extending deadlines for filing of tax returns and paying provisional and terminal tax.
- At this stage, the power will be limited for a period of 18 months and will apply to businesses affected by COVID-19.
Changes to the tax loss continuity rules
- Our current rules are quite stringent when compared to other parts of the world. It requires a minimum of 49% continuity of ultimate shareholders for a company to carry forward losses, which can be restrictive when companies need to raise capital.
- The proposed changes are to allow companies to apply “the same or similar business test” which will be modeled on the Australian rules and will apply from the 2020/2021 tax year.
- This will be a welcome change to businesses that may need to raise additional capital.
- The legislation is due to be included in the Bill in the second half of the year.
Introduction of Loss Carry Back Scheme
- This is possibly the most interesting tax measure. Businesses will be able to offset a loss in a particular tax year against a profit in the previous year and receive a refund of tax paid in the previous profitable year. The proposed mechanism will provide cash flow assistance to businesses that are or anticipate being in a loss situation.
- A temporary rule will be introduced for the 2020/2021 tax year whereby the loss will be able to be carried back to the 2019 or 2020 tax year to allow for a refund being paid. The temporary rule will allow a loss to be estimated. However as with any estimation, if an estimation is made and a refund is made incorrectly the UOMI will apply.
- A temporary legislation will be introduced in the week of 27th April.
- For later years the loss will need to be confirmed in a tax return before it can be carried back to a prior year. The permanent rule will be legislated later in the year.
Further non-tax measures include:
- Measures to support commercial tenants and Landlords
- Business consultancy support
We will keep you informed of further developments.
In the meantime, stay safe and be kind to others …
Your team at KTS
This article was written by Martina Evans (Roberts & Associates Ltd)