Debt warehousing scheme

On 2 May 2020 the Minister for Finance and Public Expenditure and Reform, Paschal Donohue TD, announced the introduction of a scheme to warehouse VAT and Employer PAYE debt (tax debts), as a result of the Covid-19 restrictions.  The Debt Warehousing Scheme (the Scheme) is available to businesses in all sectors of the economy who have been negatively impacted by Covid-19.

How the scheme operates

Tax debts deferred while a business is unable to trade or was subject to restricted trading due to Covid-19 health restrictions, as well as tax debts for an additional two months after a business resumes ‘normal’ trading, are ‘ring fenced’ for interest on tax debt purposes.

Period 1 – Covid-19 restricted trading phase:

Tax debts arising while the business is unable to trade or was subject to restricted trading, and further tax debts for an additional two months after the business re-commences ‘normal’ trading, will be warehoused. During this period no collection procedures of any of the tax debts will be initiated and no interest will apply.

All relevant returns for the restricted phases of trading must be filed to allow the tax debts to be quantified.  Where a return is filed on a ‘best estimates’ basis, the self-corrections return will have to be filed before the end of Period 1, to ensure the benefit of warehousing arrangements.

Period 1 may vary from sector to sector and business to business, depending on the relaxing of government restrictions, in line with the Roadmap for reopening society and business.

Period 2 – Zero interest phase:

Period 2 will last for 12 months after the completion of Period 1. No interest will be charged on the tax debts warehoused in Period 1. Current tax liabilities must be paid as they arise.

Period 3 – Reduced interest phase:

On the completion of Period 2, a reduced interest rate of 3 per cent per annum will be charged on the tax debts warehoused in Period 1, until such a time as those tax debts are paid in full.

Revenue have confirmed that tax clearance will not be affected by businesses availing of the Scheme and, refunds and repayments of tax arising will be paid, despite tax debts owing through the Scheme.

Revenue emphasise the importance of filing tax returns, even where payment or part payment is not immediately possible. Where key personnel are unavailable to compute tax returns due to the Covid-19 virus, businesses should file on a ‘best estimates’ basis. Subsequent amendments can be made on a self-correction basis, without penalty.

SMEs impacted by COVID-19 disruption qualify automatically.  An SME is a business with an annual turnover of less than €3million managed by Revenue’s Business Division.  Businesses managed by LCD and MED, can contact Revenue through MyEnquiries or their branch contacts for access to the warehousing scheme.

Legislation on debt warehousing arrangements is published in the Financial Provisions (Covid-19) (No.2) Act 2020 and Explanatory Memorandum

Revenue published an Information Booklet on:

  • Warehousing of tax debts associated with COVID-19 and
  • Reduced interest rate on other tax debts.

This booklet provides useful guidance on the periods for which debts can be warehoused and the movements through each phase relative to the month that the business resumed trading.

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