After some weeks of speculation, the Minister for Finance, Michael McGrath TD, has announced that the interest rate applicable to warehoused debt will be reduced from 3 percent to 0 percent. Revenue has confirmed that, where a taxpayer has already paid warehoused debt subject to interest at 3 percent, they will get a refund of that interest. Pending the legislative change, Revenue has confirmed that it will operate the reduced interest rate on an administrative basis.
Minister McGrath also noted the flexibility in the approach Revenue is taking in working with taxpayers in relation to warehoused debt. Such flexibility will be applied on a case-by-case basis and could include the extension of payment arrangements beyond five-years and the removal of the requirement to make an initial downpayment.
As previously reported, taxpayers availing of the Debt Warehousing Scheme (DWS) have until 1 May 2024 to either pay their warehoused debt in full or engage with Revenue on addressing the debt, including arrangements for a Phased Payment Arrangement (PPA). Taxpayers must continue to file their current tax returns and pay current liabilities as they fall due to remain in the DWS and benefit from the 0 percent interest rate and flexible payment options. Failure to adhere to these conditions will result in the revocation of the warehouse facility, which will result in the imposition of the standard interest rate of 10 percent, backdated to when the debt arose, and the immediate enforcement of all outstanding debt, including interest.
Commenting on the change to the scheme, Minister McGrath stated:
“This Government is acutely aware of the ongoing cost pressures faced by businesses and is determined that viable businesses are given every chance to succeed in a challenging trading environment.
Acknowledging this, I have today announced that the interest rate applicable to outstanding warehouse liabilities will be reduced from 3 percent to 0 percent. I will be bringing forward the necessary legislation to give effect to this and Revenue has confirmed that it will implement the 0 percent on an administrative basis in the meantime. Where a business has already paid warehoused debt, which was subject to interest at 3 percent, it will get a refund of that interest. This will ensure that all taxpayers are treated fairly.
My Department has engaged extensively with Revenue on this matter and I welcome their statement in relation to flexibility on Phased Payment Arrangements in respect of warehoused debt including offering extended durations for payment and accepting much reduced, or minimal, levels of down payment.
Although the total debt warehoused has decreased by €1.4 billion since January 2022, €1.72 billion remains outstanding. I also note that the number of businesses in the warehouse has reduced from approximately 105,000 at its peak to just under 57,500 and this demonstrates that businesses are doing their best to pay the amounts due but some businesses need additional space and time to address their liabilities.
Warehoused debt arose during the periods when businesses were significantly impacted by public health restrictive measures imposed during the COVID-19 pandemic. These changes to the scheme have been agreed in recognition of the unique nature of the warehoused debt and in light of the Government intention to support otherwise viable businesses to continue to trade while having the opportunity to reduce their warehoused liabilities in a structured and manageable way.
The key message is that businesses should engage with Revenue: Businesses availing of the Tax Debt Warehousing scheme need to engage with Revenue prior to 1 May 2024. To avail of the flexible approach to tax debt warehousing we are outlining today, they must also file their current tax returns on time and meet their current tax liabilities as they fall due.
As the Revenue statement said, Revenue will be pragmatic and flexible in relation to the payment plans on warehoused debt and will work with businesses in the scheme so that they can secure the viability of their business into the future.”
Speaking about Revenue’s approach to the payment of warehoused debt, Revenue’s Collector General, Joe Howley, said:
“Revenue has a proven track record in successfully agreeing flexible payment arrangements and over 2,100 businesses have already entered payment arrangements for an aggregate €158 million of warehoused debt.
The Debt Warehouse Scheme was an unprecedented measure introduced in an exceptional period to give viable businesses an opportunity to survive an emergency. Many of the businesses involved had never before built-up debt with Revenue. We are firmly committed to supporting viable businesses that have warehoused debt.
We will provide businesses, having regard to the circumstances of each individual business, with every possible flexibility in managing the payment of their warehoused debt, including the level of down payment, if any, to commence the payment arrangement, an extended payment duration, and the availability of payment breaks and payment deferral if temporary cash flow difficulties arise during the arrangement term.
The essential conditions for success are that current returns and payments are kept up to date and that there is engagement with us about their plans to deal with the warehoused debt.
We want viable businesses to survive and thrive. The purpose of the supports, such as the Wage Subsidy Schemes and the Debt Warehouse Scheme, was to maintain viable businesses and support employment. The success of those supports is clear. We recognise that most businesses continued to be timely compliant through the period and many have paid some or all of their warehoused debt. We are determined that, as we work through the warehoused debt, we will continue to support viable business.
I therefore encourage individual businesses to get ready now and engage with Revenue on addressing their warehoused debt, having regard to their individual circumstances. We are ready to work with businesses so that they can secure the viability of their business into the future, whilst ensuring that their current tax liabilities are filed and paid on time.”
Revenue guidance will shortly be updated to reflect the change announced today. In the interim, an information booklet outlining possible payment options for warehoused debt is available here.
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