Statement of Practice
Withholding tax -Interim Refunds
Section 19, Finance Act, 1987
1.1 Chapter III of Part I of the Finance Act, 1987 contains provisions for the deduction of
income tax from payments for professional services by Government Departments, local
authorities, health boards and certain statutory bodies. These provisions are generally
known as “the professional services withholding tax ". The tax deducted is available
for credit against the income tax or corporation tax liability of the recipient for a
specified year of assessment (income tax) or accounting period (corporation tax). The
current year basis of assessment of certain income which was introduced under the
terms of the Finance Act, 1990, does not alter the basic operation of the withholding
tax scheme. The interim refund and particular hardship provisions continue to
operate as before.
1.2 Section 19 of the Finance Act, 1987, contains provisions for an interim refund of the
withholding tax pending ascertainment of the tax liability against which the withholding
tax is to be credited. That section sets out certain requirements with which a taxpayer
must comply before qualifying for an interim refund. These refunds are made in certain
circumstances in the cases of ongoing businesses, commencing businesses and in cases
of particular hardship.
(i) Ongoing businesses. A person carrying on a trade or profession who
suffers a deduction of withholding tax may claim an interim refund if certain
requirements are met.
These requirements are that -
(a) the profits of the accounting period or basis period immediately
preceding that which is the subject of the claim must have been
(b) the tax payable for the accounting period or for the year of assessment
for which the profits referred to at (a) form a basis of assessment has
been paid, and
(c) the claim must be supported by the necessary documentation (i.e.
Forms F45/1 and F50).
The amount of the interim refund is the excess of the withholding tax in the claim
(excluding any amount already repaid) over the tax liability mentioned at (b) above less
any VAT, PAYE or PRSI due but unpaid.
(ii) Commencing businesses. The conditions applicable for ongoing businesses
would not allow any interim refund in the case of a person who had only
commenced business as such a person would not have any profits or tax
payable for a preceding accounting period or year of assessment as is needed to
meet the conditions already outlined. Special provisions are, therefore,
available to cater for this situation so as to enable interim refunds to be given in
such a case - details are available from the Revenue Commissioners.
(iii) Particular hardship. It is provided that, where a taxpayer claims and proves
particular hardship, the Revenue Commissioners may waive, in whole or in
part, one or more of the requirements already mentioned.
1.3 The purpose of this Statement of Practice is to outline a number of situations where
the Revenue Commissioners may, in accordance with paragraph 1.2 (iii) above, agree
to the waiving of some of the requirements for an interim refund. These involve
circumstances in which the ordinary rules relating to the interim refund mechanism
would operate in such a way as to be unreasonably harsh on a person. The Statement
also sets out the basis of computation of the interim refund in such cases.
1.4 The Statement is issued for guidance only. It does not purport to be a legal
interpretation nor does it affect the rights of taxpayers under the relevant provisions. It
is to be regarded as illustrative rather than exhaustive of the types of situations in
which particular hardship may be found.
2 Situations where particular hardship may arise
2.1 The term “particular hardship" is interpreted so as to modify the general provisions
outlined in paragraph 1.2 (i) concerning interim refunds for cases that would normally
come within those provisions but are excluded due to some unusual and extraordinary
2.2 The Revenue Commissioners are prepared to accept that particular hardship may arise
in the following types of circumstances:
(i) Where, through no fault on the part of a taxpayer, the tax liability for the
previous year of assessment or accounting period is not yet finally determined
and the withholding tax deducted in the period of claim is substantially in
excess of the taxpayer's normal tax liability. The delay in settling liability might
be due to an exceptional occurrence in the business of the taxpayer or his
adviser - for example, as a result of a fire at their premises.
(ii) Where, owing to once-off or unusual receipts, irrespective of their source, the
tax liability of the previous year of assessment or accounting period is
substantially in excess of the taxpayers usual tax liability. For example, a
barrister might, during a particular period, act in connection with a judicial
enquiry. Fees, substantially higher than usual, might be received and taxed in an
assessment related to that period and such tax might be substantially higher
than would be normal in the practice.
(iii) Where, owing to a once-off or unusual reduction in the level of a person's
income, the withholding tax paid in the credit period for a year of assessment is
substantially in excess of the liability for that year. An instance of this kind of
situation would be where, say, a chemist suffers serious illness and is obliged to
hire a locum to service his business. This additional expense would impact on
the taxpayer's income and would probably lead to a substantial reduction in the
tax liability for the year of assessment or accounting period in which the
occurrence takes place.
(iv) Where, owing to a demonstrable permanent substantial reduction in the level of
income of the taxpayer (arising, for example, from the loss of a major
contract), the use of the tax liability of the previous year of assessment or
accounting period would not constitute a reasonable estimate of the tax liability
which the withholding tax is intended to cover.
(v) (a) Where income tax (i.e. income tax net of withholding tax credited) which
becomes due, and is actually paid, in a period of claim when combined with
withholding tax deducted in that period exceeds 53% of a person's income for
(b) For the purposes of subparagraph (a), provided the Revenue
Commissioners are satisfied that the person's income has not materially
changed, the income of the immediately preceding basis period will be taken
as the income of the period of claim If the Revenue Commissioners are
satisfied that there is a material change in the amount of a person's income, the
Revenue Commissioners will, having regard to all the circumstances, estimate
to the best of their knowledge and belief the person's income for the period of
(vi) In paragraphs 2.2 (ii), (iii), (iv) and (v), references to the amount of a person's
income or to changes in the amount of a person's income mean, in the case of
trading professional or rental income, the amount or changes in the amount of
that income as disclosed by the accounts of the trade etc. prepared or to be
prepared in accordance with correct principles of commercial accounting.
3 Amount of interim refund
3.1 In general, the amount of an interim refund is the excess of the tax deducted over a
figure representing the tax paid (before credit of withholding tax) for the preceding
year of assessment or accounting period (referred to subsequently in this section as
3.2 Section 19 enables the Revenue Commissioners to refund an amount which they
consider to be just and reasonable in a case of particular hardship. In all hardship cases
(other than that outlined in paragraph 2.2(v) - which is dealt with in paragraph 4 of this
Statement of Practice) the amount of the refund follows the general rule in paragraph
3.1 as modified by paragraph 3.3.
3.3 In the cases listed in paragraphs 2.2 (i), (ii), (iii) and (iv) “the figure” is as follows:
Cases within paragraph 2.2(i)
(a) Where details of the income for the previous period are not available - the normal
tax based on the tax liability for earlier periods and any further relevant information
(b) Where details of income are available but the case is subject to an appeal to the
Appeal Commissioners on a point of principle, normally the point of principle will
affect only the liability for the period in which it arises. In such a case the figure to be
taken is the liability based on the taxpayer's view of the correct treatment of the
disputed item. This is subject to the Revenue Commissioners being satisfied that the
question as to the taxpayer's liability in the matter in dispute gives rise to a substantial
issue to be determined on the appeal and that it would in the circumstances be
appropriate to allow the taxpayer's view of the correct treatment of the disputed item
to stand for the purpose of computing the amount of the interim refund pending the
(c) Where the Appeal Commissioners have given their decision on the point in
contention and the case is subject to further appeal either to the Circuit Court or the
High Court - if the point of principle affects only the liability for the period in which it
arises, the figure to be taken will be the liability based on the taxpayer's view of the
correct treatment of the disputed item. In any other case, the figure to be taken will be
the liability based on the decision of the Appeal Commissioners.
Cases within paragraph 2.2(ii)
The liability on the basis of omitting the once-off or unusual receipts.
Cases within paragraph 2.2(iii)
The liability based on the present level of the taxpayer's income. This will be estimated
by the Inspector to the best of his ability. In such cases the interim refund (or the
additional interim refund) will be made in respect of the credit period for the year of
assessment in which the substantial reduction in liability occurs (i.e. the immediately
Cases within paragraph 2.2 (iv)
The liability based on the present level of the taxpayer's income. This will be
estimated by the Inspector to the best of his ability.
4 Cases within paragraph 2.2(v)
In general, the relief will be such that, where the sum of the withholding tax deducted
plus the income tax which becomes due in the period of claim and is paid in that period
exceeds 53% of the person's income for that period, the excess will be repaid.
5 Other matters
5.1 To qualify for an interim refund a taxpayer must have paid the income tax/corporation
tax due for the previous period. In cases of particular hardship, the Revenue
Commissioners will waive this condition where the taxpayer agrees to the set-off of the
interim refund against the outstanding tax.
5.2 In calculating the interim refund, any amounts of PAYE/PRSI/VAT which a taxpayer
is liable to remit to the Revenue Commissioners are also deducted. In cases of
particular hardship, the Revenue Commissioners will consider waiving this requirement
as part of a comprehensive arrangement by which the taxpayer proposes to bring
his/her affairs up to date. Such an arrangement would normally involve the setting off
of any interim refund against the taxpayer's liabilities.
6.1 All claims for repayment of withholding tax should be submitted to the Tax District to
which the claimant makes his/her return of income.
6.2 Claims to repayment on the basis of particular hardship should be supported by such
documentation as is necessary to satisfy the Revenue Commissioners that the claimant
comes within the terms of this Statement of Practice. Appropriate assurances should
also be supplied - for example, in a case within paragraph 2.2(ii) of the Statement, the
taxpayer or agent should certify that the receipt which gives rise to the claim was a
once-off and exceptional receipt.
The Revenue Commissioners