Revenue reminds businesses of the end to debt warehousing scheme

Revenue’s tax debt warehousing scheme

In the early days of the pandemic, the Government moved fast to introduce numerous schemes to counter the financial impact businesses would suffer because of the lockdowns and restrictions introduced. One of these schemes allowed businesses to warehouse their tax debts. Businesses that suffered from a significant reduction in their turnover or volume of customer orders could defer paying certain tax liabilities, such as income tax, PAYE (employer), and VAT. This was initially offered at 0% interest, with it rising to 3% from January 2023. From this date, companies must have agreed to a phased payment arrangement with Revenue.

However, with the pandemic continuing into a second year, this scheme was further extended for some businesses. For those who were already eligible for warehousing and had a valid claim for a Government Covid-19 Support Scheme such as the Employment Wage Subsidy Scheme or Covid Restrictions Support Scheme, the dates were extended with the 3% interest not being charged until 1st May 2023.

The debt still warehoused

This warehousing scheme has offered a lifeline to many businesses who were severely affected by Covid-19, freeing up much needed funds. Since the scheme was introduced, 250,000 companies have participated in the scheme with €30.9 billion debt eligible for warehousing. Since then, businesses have paid €23.1 billion of this in the due month and paid another €4.9 billion after the due month. This shows that, in most cases, businesses have been able to meet their tax payment obligations, which is obviously good news.

However, there is another €3 billion of debt, which is still being warehoused by almost 105,000 businesses, with 12,000 of them still warehousing all their tax debts. Unsurprisingly, the majority of these are those within the sectors hit hardest by the pandemic: accommodation and food services, and arts, entertainment, and recreation. Between them, these businesses currently owe Revenue €300 million. It is also unsurprising to discover that it is the wholesale and retail sector which has the largest amount of overall debt, with 16,000 of these businesses owing €670 million.

These figures demonstrate the pressures these businesses continue to face two years after the start of the pandemic. Revenue is now contacting them to remind them when the scheme will end. Collector-General, Joe Howley, also said, “I am also reminding businesses, that while their tax debts are warehoused, they need to file current tax returns as they fall due and pay the associated tax liabilities on time,” and not doing so, will mean the business, “will lose the benefits of the Debt Warehousing Scheme”. This would result in all debts being due immediately, with no reduction in interest rates. However, Revenue will contact all businesses to arrange a personalised repayment arrangement.

Facing future challenges

This could obviously be a difficult time for those businesses who are still struggling, following the pandemic. They will need to meet their current tax liabilities and arrange repayment of the warehoused tax, as well as facing new challenges such as the rising cost of energy and the outbreak of war in Ukraine.

Chambers Ireland are urging the Government to remain flexible with their policies as they continue to wind up the support they offered to businesses over the last two years. While the warehousing scheme was a lifeline that inevitably supported many households, they are now facing fresh difficulties.

Be prepared

However, with no sign of the Government changing their current approach, businesses need to be prepared. Proper financial planning and management are going to be essential. Whether you’re a business experiencing difficulties or one looking towards growth, EFM Ireland can support you. With Financial Directors and Financial Controllers available on a flexible, cost-effective basis, we can advise and support you in the financial challenges you face and help you grow towards a prosperous future.

Get in touch to find out more about how we can help.

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