Today, Revenue confirmed that the Debt Warehousing Scheme remains available to support businesses experiencing tax payment difficulties arising from the current COVID-19 Level 5 public health restrictions, which are to remain in place until at least 31 January 2021.

The Debt Warehousing Scheme allows businesses to ‘park’ PAYE (Employer) and VAT tax debts arising from the COVID-19 crisis, as well as self-assessed income tax amounts (balance of 2019 Income Tax liability and 2020 preliminary tax) and Temporary Wage Subsidy Scheme overpayments. These debts can be ‘parked’ on an interest free basis for 12 months following resumption of trading. At the end of the 12-month interest free period, the warehoused debt may be paid in full without incurring an interest charge or paid through a phased payment arrangement at a significantly reduced interest rate of 3% per annum. This compares to the standard rate of 10% per annum that would otherwise apply to such debts.

Currently, approximately 70,000 businesses are availing of the scheme covering €1.9 billion in tax debt.

Following the recent move to Level 5 restrictions, Revenue confirmed that this vital liquidity support remains available, and businesses which have had to close can continue to warehouse current VAT and PAYE (Employer) liabilities.

Acknowledging the difficulties for businesses that have had to close again or remain closed, Collector-General, Joe Howley, said:

The move to Level 5 public health restrictions at the end of December 2020 is going to further impact in what continues to be a most challenging and uncertain time for businesses. The Debt Warehousing Scheme was designed to alleviate financial burden and to give businesses certainty regarding the payment of tax debts. Any business experiencing trading difficulties as a result of COVID-19 restrictions can avail of the Debt Warehousing Scheme whether it had done so during the previous period(s) of trading restrictions or not. Businesses that did previously avail of the scheme and subsequently resumed trading and paying their tax debts as they arose can recommence using the scheme if their trade has again been impacted by the latest restrictions.”

The terms of the scheme remain the same in that access is automatic for SMEs and on request for larger businesses.

It also remains a requirement that the business continues to file all relevant tax returns for the restricted trading period(s) so that the tax debt can be included in the warehousing scheme.

Notes

Access to the scheme:

• For tax purposes, an SME is a business with turnover of less than €3 million and which is managed by Revenue’s Business Division.
• Larger businesses managed by Revenue’s Medium Enterprise Division (MED) and Large Corporates Division (LCD) that wish to avail of the scheme can contact the Collector-General’s Office, via the MyEnquiries service, which is available on a 24/7 basis in ROS, or by telephone to 01-7383663 (available Monday to Friday 9.30am to 1.30pm).
• Detailed guidance on the warehousing of tax debts associated with COVID-19 can be found here.

Example Case Study

Business ‘A’, a gastro pub/restaurant, closed because of COVID-19 restrictions in March 2020.

The business reopened in June 2020 following the lifting of restrictions for the food hospitality sector.

Based on re-opening in June 2020, the business is entitled to warehouse its PAYE (Employer) liabilities in respect of February to August 2020 and its VAT liabilities in respect of January to August 2020 (i.e. restricted trading time plus two months).

The business would have been due to pay its PAYE (Employer) liabilities for September 2020 in October 2020 and its VAT liabilities for September/October 2020 and its PAYE (Employer) liabilities for October in November 2020.

However, when the country was placed into “Level 3” restrictions in October 2020, the business was required to close again as it did not have an outdoor facility to serve food or drink. It was not viable to offer a takeaway service and the business had to close from 7 October. On that basis, the business is entitled to resume ‘warehousing’ its PAYE and VAT liabilities, including the above-mentioned months. The period available to the business to warehouse these liabilities is dependent on when it reopens.

If the business reopened for a few weeks in December 2020 and then closed again with the re-imposition of the current Level 5 restrictions, the warehouse timeline will depend on when the business returns to trading in 2021.

For example, should restrictions be lifted, and the business allowed to trade again by the end of March 2021, the warehouse timeline extends to June 2021 (i.e. restricted trading time plus two months) and is applicable to all COVID-19 related PAYE (Employer) liabilities from February 2020 to June 2021 and VAT liabilities in the period between January 2020 and June 2021 inclusive.

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