Manufacturing Relief CT

Manufacturing Relief -where company commenced trading on or after 23 July 1998

Introduction

Section 74 Finance Act 1999, which amended Section 442 TCA 1997, introduced a phased withdrawal of Manufacturing Relief.

In general, manufacturing companies that commenced trading on or after 23 July 1998 were only entitled to Manufacturing Relief on trading profits earned up to 31 December 2002. Manufacturing companies that commenced trading prior to 23 July 1998 and manufacturing companies that entered into a grant agreement with an industrial development agency (as defined) before 31 July 1998 but did not commence trading until after that date, continue to qualify for Manufacturing Relief until 31 December 2010.

In addition the following companies continue to qualify for Manufacturing Relief, but only until 31 December 2005:

• Manufacturing companies that are engaged in deemed manufacturing activities carried on in the Shannon Airport area approved on or before 31 May 1998, (Section 445 TCA 1997), and
• Manufacturing companies that are engaged in deemed manufacturing activities carried on in the Custom House Docks Area approved on or before 31 July 1998, (Section 446 TCA 1997).

The purpose of this article is to clarify how to deal with this relief when the accounting period spans any of the above dates and how to return income that qualifies for manufacturing relief on the Form CT1.

Apportionment of trading profits

Where a company’s accounting period spans any of the above dates the company’s assessable profit should be apportioned on a time basis to give an amount that is liable at 10% (due Manufacturing Relief) and an amount liable at the standard trading rate, currently 12.5%.

Example

A manufacturing company that commenced trading on 1 August 1999, prepares a twelve month account with an end date of 31 July 2003. These accounts show a taxable profit of €120,000

Rate of CT applicable:

Period 1/8/2002 - 31/12/2002 - 120,000 × 5/12 = 50,000 @ 10%

Period 1/1/2003 - 31/7/2003 - 120,000 × 7/12 = 70,000 @ 12.5%.

Form CT1

When filing the 2003 Corporation Tax return, Form CT1 2003, only manufacturing profits that are entitled to Manufacturing Relief should be entered in the Manufacturing Trade Profits section of Panel 1 (Trading Profits). A company’s trading profits that are not entitled to Manufacturing Relief, should be entered in the Non-manufacturing Trade Profits section of Panel 1.

The 2004 Form CT1 has been changed to reflect the restriction of entitlement to Manufacturing Relief.