In a tax briefing issued by the Revenue Commission following the introduction of Section 58 of the 2002 Finance Act, new arrangements for the payment of preliminary corporation tax were set out for companies whose tax payments were not going to exceed EUR50,000. This allowed them to defer the first installment of tax, as long as they paid at least 90% of their tax bill in the second installment.

However, in an e-brief published on Tuesday - barely 24 hours prior to the preliminary tax deadline - the Revenue advised tax practitioners that the scheme was no longer in operation for accounting periods ending on or after 1 January 2006, and that any company which had not paid must do so "without further delay." These companies will also have to write a letter explaining how the misunderstanding occurred.

In a letter to Revenue Commission Chairman Frank Daly, Dermot O’Brien, President of the Irish Taxation Institute, expressed bewilderment that the scheme was revoked so soon before the payment deadline with little in the way of consultation or publicity.

"The Institute objects to the withdrawal of a very important arrangement for the smallest companies in our economy. We are also very surprised at the manner in which it was withdrawn," wrote O'Brien.

"It is unreasonable from a compliance cost and cash-flow cost perspective to expect these businesses to immediately calculate and pay tax which they had not budgeted for and which is immaterial to the exchequer in terms of overall yield in 2006 to date. It is also unreasonable to expect all such companies to write letters of clarification to the Collector General as required by e-brief 43," he added.

O'Brien also noted that the move contradicts efforts by the government and the Revenue to simplify the tax system to encourage small firms to grow.

"It is hard to see how the withdrawal of a key arrangement fits into this overall agenda for change," he told Daly.

According to the Revenue, the measure was not revoked but merely expired after a four-year "transition period", as set out in the original rules in 2002. It said that its recent e-brief was an attempt to clarify the situation.