Debt warehousing – income tax

Oct 27, 2020

Section 63 of Finance Bill 2020 includes provisions which extend the tax debt warehousing measures to income tax for self-assessed taxpayers. The provisions allow for the warehousing of ‘Covid-19 income tax’, where the taxpayer, as a result of COVID-19 restrictions, will experience a reduction in their 2020 income of at least 25 percent, when compared with their income for 2019. The provisions also allow for an individual who did not have self-assessed income in 2019 to warehouse their income tax where they are unable to pay, due to the adverse impact of COVID-19 restrictions.

Covid-19 income tax includes the balance of income tax due for 2019 and preliminary tax due for 2020. Legislative provisions also allow for the warehousing of income tax for 2021. Where a taxpayer experiences a 25 percent reduction in their income for 2021, compared to their income in 2019; or if the taxpayer did not have income subject to self-assessment in 2019, they can warehouse the balance of income tax due for 2020 and preliminary tax for 2021.

Through the debt warehousing scheme, these balances can be deferred interest free from the date on which the above liabilities are due and payable and ending on either the filing of the income tax return of the tax year or 31 October 2021, where all or part of the person's income tax for 2021 is also warehoused (Period 1).

Following the completion of Period 1, a zero-rate of interest will be applied for 12 months (Period 2), and on the completion of Period 2 interest will be charged at the reduced rate of 3 percent per annum, until such a time as the debt is paid in full (Period 3).

In order to access the debt warehousing scheme for self-assessed income tax, a taxpayer is required to make a declaration to the collector general when filing their income tax return for 2019, that:-

  • they estimate their total income for 2020 will be less than 75 percent of their total income for 2019; or
  • they have formed the view that there are unable to pay their Covid-19 income tax, where they do not have self-assessed income for 2019; and
  • the decrease or inability to pay is a consequence of the effects of public health restrictions, provided for in regulations made under section 5 and 31A of the Health Act 1947.

The return and declaration are due for on 31 October 2020 or, if the taxpayer is filing electronically via ROS, 10 December 2020. Such declarations may be subject to the enquiries of a Revenue officer.

Taxpayers who warehouse Covid-19 income tax will be required to comply with requirements in relation to filing returns and paying other liabilities in full and on time. Otherwise, the normal 8 percent per annum interest will apply.

Participation in the debt warehousing scheme for Covid-19 income tax will not impact on the ability of a taxpayer to obtain tax clearance. 

Enforcement action by the Collector-General of warehoused debt will be suspended for the three periods of the warehousing scheme provided the business complies with all the provisions of this scheme but enforcement action will recommence if the provisions are breached.

Where a declaration made in accessing the debt warehousing scheme for Covid-19 income tax transpires to be incorrect, then the income tax payable by the relevant person for 2020 will be deemed to be due and payable on 31 October.

A declaration similar to that described in respect of 2020 income is required for the warehousing of Covid-19 income tax for 2021 with similar conditions attaching.

The draft provisions relating to the debt warehousing of Covid-19 income tax are included in Section 63 of the Finance Bill 2020.