Services

Debt Warehousing

Revenue introduced this tax deferral measure as a result of the pandemic as they recognised that businesses which are negatively impacted may not be able to enter into arrangements to clear Covid-19 related debt in the short term.

The measures announced allow for any debt associated with VAT or Employers PAYE can be deferred or ‘warehoused’ for a period of 12 months after the period in which the business resumes trading. The period which is covered under the scheme is the period of time in which the business was unable to operate and includes 2 months after which the business resumes trading.

No statutory interest will be applied to the outstanding debts during the 12 month + 2 month deferral period. Revenue have also introduced a lower interest rate of 3% per annum on the repayment of such warehoused tax debts once the debt warehousing period has lapsed. This represents a reduction from a current rate of c.10% per annum on the overdue VAT and PAYE (Employer) liabilities.

The full details of Revenue’s formal guidance on the Debt Warehousing Scheme can be found here.

Budget 2021 provided for the inclusion in the debt warehousing scheme of the Income Tax liability falling due on 31 October 2020 which is to include the 2019 Income Tax liability balancing payment and any Preliminary Tax Payment due for 2020. The application of this scheme by Revenue is conditional on all tax returns being filed. A declaration must be made to Revenue by the taxpayer that their total expected income for 2020 is likely to be at least 25% less than their total income for 2019. However, when filing the 2020 Income tax return in 2021, if the taxpayer does not meet this 25% requirement, the debt will be removed from warehousing and the due date for such debt will be 31 October 2020 for both the taxpayers’ 2019 and 2020 Income tax returns and full statutory interest will apply in such cases.

Any refunds or repayments of tax which are arising during the warehoused Covid-19 periods would be repaid to companies notwithstanding that they are availing of warehoused debts procedure, however, if they so wish, any refunds owing can be offset against the warehoused debts or other outstanding debts on request.

In addition, in recent months, the claims to TWSS have been the subject of an ongoing compliance review programme, and in the event that some of the TWSS needs to be repaid, such repayments can be deferred as part of the Debt Warehousing Scheme.

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Return to The Tax Issue - Autumn / Winter 2020