1080B Covid-19: special warehousing and interest provisions (income tax)

Summary

This section permits self-assessed income taxpayers, whose income has fallen by more than 25% due to the impact of Covid-19 trading restrictions, to warehouse the balance of self-assessed income tax, PRSI and USC for 2019 and preliminary income tax, PRSI and USC for 2020 (“Covid-19 income tax”) due to be paid on or before 31 October 2020 or 10 December 2020, as appropriate. Where an individual’s income for 2021 turns out to be more than 25% less than that for 2019, s/he can warehouse the balance of 2020 income tax, PRSI and USC and preliminary income tax, PRSI and USC for 2021, and get an additional 12 months at zero interest on the previous year’s liabilities.

In certain circumstances, self-assessed income taxpayers who have a material interest in their employer company which is warehousing its PAYE (Employer) liabilities, but who do not meet the relevant reduction in turnover criteria for income tax warehousing, may avail of warehousing in respect of liabilities on their Schedule E income from that employer company only.

Details

(1) A number of terms used in the section, including “the Acts”, “Covid-19”, “Covid-19 income tax”, “Period 1”, “Period 2”, “Period 3” and “relevant person” are defined.

“the Acts” has the same meaning as it has in section 1080A;

“Covid-19 income tax” means income tax liabilities due to be paid during Period 1. This includes the balance of income tax payable for 2019 and preliminary tax for 2021. Where Period 1 is extended, this may also cover balance of income tax for 2020 and preliminary tax 2021.

“Period 1” – will be 31 October 2020 or the extended date of 10 December 2020, the due date for payment of IT 2019 and PT 2020. Period 1 may be extended in circumstances where a relevant person forms the view that, due to trading restrictions imposed as part of the Government’s response to Covid-19, their total income for 2021 will be at least 25% less than their total income for 2019. To avail of this extension, the relevant person must apply to Revenue;

“Period 2” (the zero interest phase) will run from the end of Period 1 for 12 months;

“Period 3” (the reduced interest phase) will run from the end of Period 2 until IT 2019 and PT 2020 are paid in full;

“relevant person” is a person who is required to file a return by virtue of Chapter 1 of Part 38 and chargeable persons for income tax for the purposes of Part 41A.

(2)(a) & (b) Income tax warehousing will apply to ‘relevant persons’ who are unable to pay their Covid-19 income tax as a result of the effect of Covid-19 on her/his income and who comply with the requirement to file returns under Chapter 1 of Part 38 or Chapter 3 of Part 41A, as appropriate.

(3)(a) & (b) A relevant person will be deemed unable to pay all or part of her/his Covid-19 income tax where they make a declaration to the Collector-General stating that s/he estimates that her/his total income from all sources for 2020 will be less than 75% of her/his total income for 2019 and that this decrease has resulted from the trading restrictions imposed under the Government’s roadmap for reopening society and business.

(4) Where a relevant person was not a relevant person for 2019 the relevant person will be deemed unable to pay her/his Covid-19 income tax where s/he believes that as a result of the impact of Covid-19 trading restrictions s/he is unable to pay and s/he makes a declaration to this effect to the Collector-General.

(5) A declaration under subsection (3) or (4), as appropriate, should be made at the time of filing the 2019 income tax return and no later than 31 October 2020 or such later date as may be provided for in the case of electronically filed returns. (the pay and file date for 2019 income tax returns has been extended to 10 December 2020 for returns filed electronically).

(6) Where a relevant person:

• estimates that her/his total income for 2021 will, as a result of Covid-19 trading restrictions, be less than 75% of her/his total income for 2019 and as a consequence of this impact, will be unable to pay the balance of 2020 income tax and preliminary tax for 2021, or
• was not a relevant person for 2019 and has formed the opinion that because of the impact of Covid-19 trading restrictions on her/his income, s/he will be unable to pay the balance of 2020 income tax and preliminary tax for 2021

s/he can make a declaration to this effect to the Collector-General and by doing so can have Period 1 extended to the due date for payment of the balance of 2020 income tax and preliminary tax 2021.

(7) A declaration under subsection (6) should be made at the time of filing the income tax return for 2020 and no later than 31 October 2021 or such later date as may be provided for in the case of electronically filed returns.

(8) A Revenue officer can make any necessary enquiries to satisfy herself/himself as to the relevant reduction in the relevant person’s total income for 2020 and/or 2021, as appropriate or where the relevant person was not a relevant person for 2019, that s/he is unable to pay her/his Covid-19 income tax in 2020 or 2021.

(9) Interest under section 1080 Taxes Consolidation Act 1997 is disapplied to the relevant person’s Covid-19 income tax in circumstances where this section applies.

(10) Where this section applies to a relevant person and the relevant person complies with the obligations imposed under the Acts (for example, timely filing of returns and payment of liabilities) then the normal interest rate (c. 8% per annum as of June 2020) as provided for in section 1080 TCA will not apply during the Period 1 and Period 2.

(11) Where in addition to complying with her/his obligations under the Acts, a relevant person, before the end of Period 2, enters into an agreement with the Collector-General to pay her/his Covid-19 income tax and interest on that tax and complies with the terms of this agreement, with effect from the first day of Period 3 interest at a rate of 0.0082% per day or approximately 3% per annum will apply on the balance of Covid-19 income tax outstanding.

(12) A number of circumstances can result in the interest rates provided for in section 1080 TCA reapplying to late payment of the Covid-19 income tax. These are:

• where a relevant person fails to comply with obligations under the Acts or fails to comply with the terms of an agreement entered into in respect of repayment of the Covid-19 income tax. In these cases, interest under section 1080 TCA will apply with effect from the date of the happening of the event which gave rise to non-compliance.
• where a relevant person fails to enter into an agreement in respect of repayment of the Covid-19 income tax. In this case, interest under section 1080 TCA will apply with effect from day 1 of Period 3.

(13) Where a declaration is made under:

• subsection (3) and it is subsequently found that the relevant person’s total income for 2020 is greater than or equal to 75% of the relevant person’s total income for 2019; or
• subsection (4) and it is subsequently found that the relevant person’s total income for 2020 has not been impacted by Covid-19 trading restrictions

income tax payable by that person for 2020 will be deemed to be due and payable on 31 October 2020. Statutory interest will be payable by the relevant person on the amount of Covid-19 income tax remaining unpaid, calculated from that date until paid in full at a rate of 0.0219% per day (c. 8% per annum).

(14) Similarly, where a declaration made under subsection (6) is found to be false insofar as the relevant person’s total income for 2021 is greater than or equal to 75% of the relevant person’s total income for 2019 or where a relevant person, who was not a relevant person for 2019, declares that s/he is unable to pay their Covid-19 income tax and it is subsequently found that her/his income for 2021 has not been impacted by Covid-19 trading restrictions then income tax payable by that person for 2021 will be deemed due and payable on 31 October 2021 and interest will be due and payable on any Covid-19 income tax remaining unpaid from 31 October 2021, calculated on the amount outstanding from that date until payment in full has been made at a rate of 0.0219% per day(c. 8% per annum).

(15) Where insufficient preliminary tax has been paid for 2019, the total income tax liability for 2019 is due on 31 October 2019. These liabilities cannot be treated as Covid-19 income tax and therefore cannot be warehoused.

(16) Where this section applies to a relevant person, section 959AO(3) TCA will not apply. Warehousing of PT 2020 will not result in 2020 income tax liabilities being due and payable on 31 October 2020.

(17) Warehousing of Covid-19 income tax will not prevent a relevant person from obtaining tax clearance under section 1094 or 1095 TCA, as appropriate.

(18) The Collector-General will not issue demands in respect of Covid-19 income tax provided the relevant person complies with her/his obligations to file returns required under Chapter 1 of Part 38 and / or Chapter 3 of Part 41A TCA.

(19) A relevant person who has a material interest (within the meaning of section 997A) in their employer company and who is not entitled to credit for taxes deducted from their emoluments under section 997A TCA because their employer has availed of warehousing for its PAYE (Employer) liabilities may avail of income tax warehousing, even where they do not meet the 25% income reduction criteria In these circumstances, warehousing is only available in respect of the Schedule E liabilities relating to their salary from the employer company which has warehoused its PAYE (Employer) liabilities.

(20) Where a self-assessed income taxpayer attempts to warehouse more than the income tax liabilities relating to their Schedule E income from the employer company in which they have a material interest (and which has warehoused PAYE (Employer) liabilities), they will be removed from the warehouse and the payment date for the balance of income tax for 2020 will revert to the preliminary tax due date (31 October 2020). Interest at the normal rate of c. 8% per annum will apply with effect from the preliminary tax due date.

Relevant Date: Finance Act 2021