Revenue Note for Guidance

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Revenue Note for Guidance

114B. Covid-19: special warehousing and interest provisions

Summary

Section 114B provides that the Revenue Commissioners may treat the business of certain accountable persons as being adversely affected by Covid-19 and from an agreed date may agree to temporarily suspend the VAT liabilities and interest as a consequence of the effects on the person’s business of Covid-19.

The scheme allows for the deferral of unpaid VAT and PAYE (Employers) debts arising from the COVID-19 crisis for a period of 12 months after a business resumes trading (in accordance with the Reopening Roadmap) and the application of a lower interest rate of 3% per annum on the repayment of such warehoused tax debts after that date.

As part of the July 2020 Jobs Stimulus Package, the Government announced the application of a lower interest rate of approximately 3% per annum for non–COVID-19 related tax debt. Applications to avail of this arrangement were required to be submitted to the Collector-General on or by 31 October 2020.

Additional details of the scheme which applies to various taxes including VAT are available.

Details

(1) Subsection (1) sets out various definitions of terms used in the section.

The Acts are defined as meaning the Financial Provisions (Covid-19) (No. 2) Act 2020, Parts 18C and 18D of the Taxes Consolidation Act 1997, the Stamp Duty Act 1999, the Capital Acquisitions Act 2003, the Finance (Local Property Tax) Act 2012, the Customs Act 2015, the Capital Gains Tax Acts, the Tax Acts within the meaning of section 1 of the Taxes Consolidation Act 1997, the statutes relating to the duties of excise and the management of those duties and any instruments made under those enactments.

Covid-19 has the same meaning as it has in the Emergency Measures in the Public Interest (Covid-19) Act 2020.

Covid-19 liabilities means value-added tax due and payable by an accountable person under this Act and regulations made under this Act, in respect of Period 1.

Period 1 means the period (a) beginning on the later of (i) the first day of the taxable period immediately preceding the taxable period in which the accountable person’s business was first adversely affected by Covid-19 and (ii) 1 January 2020 and (b) ending on the last day of the taxable period next following the recommencement date falls.

This period is, the “COVID-19 restricted trading phase”, and it covers the period when the business first experienced cash flow trading difficulties arising from the impact of COVID-19. This is 1 January 2020 for VAT (that is, beginning with the January/February 2020 bi-monthly VAT period).

Period 1 ends on the last day of the first full bi-monthly VAT taxable period which commences after the business has resumed trading.

Period 2 means the period (a) beginning on the day next following the last day of Period 1 and (b) ending on the day the earlier of (i) the day that is 12 months from the day first-mentioned in (a) and 31 December 2022 or where the Minister makes an order the day then it is the earlier of (i) the day specified in the order and 31 December 2022.

This period is, the “zero per cent interest phase”, and it is the period of 12 months beginning on the first day after the end of Period 1. No interest is charged during Period 2 on the warehoused liabilities from Period 1.

Period 3 means the period (a) beginning on the day next following the last day of Period 2 and (b) ending on the day on which the accountable person has discharged the Covid-19 liabilities being VAT in full.

This period is the “reduced interest rate of 3% per annum phase”, and it begins on the first day after the end of Period 2 and continues until the date on which the COVID-19 deferred liabilities are discharged in full. This is the phase where a reduced interest rate of 3% per annum applies until the warehoused debt has been fully discharged.

Recommencement date in relation to an accountable person means the later of –

  1. the day on which the accountable person’s business ceased to be subject to restrictions provided for in regulations made under section 5 and 31A of the Health Act 1947 and
  2. where it can be demonstrated to the Revenue Commissioners that the business did not recommence on the day referred to in (a), the day on which the business recommenced after it ceased to be subject to those restrictions.

(2) Subsection (2) provides that the business of an accountable person shall be treated as adversely affected by Covid-19 from the date the Revenue Commissioners agreed to temporarily suspend the collection of the VAT liabilities of the accountable person as a consequence of the effect on the accountable person’s business of Covid-19.

(3) Subsection (3) applies to an accountable person who –

  1. as a consequence of the effects on the accountable person’s business of Covid-19 is unable to pay all or part of his/her Covid-19 liabilities,
  2. furnishes returns in accordance with the requirements of Chapter 3 of Part 9 of the VATCA 2010 and
  3. either has his/her tax affairs dealt with by the Personal Division of the Office of the Revenue Commissioners or where the accountable person has formed the view that he/she is unable to pay all or part of the tax and has notified Revue of that view.

(4) Subsection (4) provides that in order to satisfy the condition of paragraph 3(c) a person’s tax affairs shall be deemed to be treated as dealt with by the Personal Division where the most recent correspondence received by the accountable person was from that Office.

(5) Subsection (5) provides that an inspector of taxes or other officer nominated by Revenue for the purpose of section 111 of the VATCA 2010 (assessments of tax due) may make enquiries as to satisfy themselves as to whether an accountable person is unable to pay all or part of that person’s Covid-19 liabilities.

(6) Subsection (6) provides that where section 114B applies to an accountable person then section 114 which covers the charging of interest does not apply to that person.

(7) Subsection (7) provides that where section 114B applies to an accountable person and that person has complied with all obligations under the Acts, then no interest shall be due on that accountable person’s Covid-19 liabilities during Period 1 and Period 2.

(8) Subsection (8) provides that –

  1. where this section applies to an accountable person and
  2. where that person complies with obligations arising under the Acts and
  3. the accountable person has, prior to Period 3, entered into an agreement with the Collector- General to pay the Covid19 VAT liabilities, together with interest and
  4. complies with that agreement as set out in paragraph (c),

then in such circumstances simple interest shall be paid by the accountable person to the Revenue Commissioners from the first day of Period 3 on any amount of Covid-19 VAT liabilities remaining unpaid and such interest shall be calculated from that day until payment of the amount for any day or part of a day during which that amount remains unpaid, at a rate of 0.0082 per cent, which approximates to about 3% per annum.

(9) […]

(10) Subsection (10) provides that where, during period 1 or period 2, an accountable person fails to comply with their obligations under the Acts or fails to comply with the obligations under the agreement with Collector-General, simple interest shall be paid by the accountable person to the Revenue Commissioners on any amount of the Covid-19 liabilities remaining unpaid on the date on which the event resulting in failure to comply with the obligation concerned occurred. In such cases, interest shall be calculated from that day until payment of the amount for any day or part of a day during which that amount remains unpaid, at a rate of 0.0274 per cent

This Subsection also provides that where the accountable person has, on the first day of Period 3, has not entered into an agreement with the Collector-General to pay their Covid-19 liabilities, together with interest under this subsection, simple interest shall be paid by the accountable person to the Revenue Commissioners on any amount of the Covid-19 liabilities remaining unpaid on the first day of Period 3. In such cases, interest shall be calculated from that day until payment of the amount for any day or part of a day during which that amount remains unpaid, at a rate of 0.0274 per cent.

(11) […]

(12) Subsection (12) provides that where an accountable person –

  1. is an authorised person for the purposes of section 77, that is an accountable person who has been permitted to make returns and payments at less frequent intervals than normal but not exceeding 12 months, and
  2. has been authorised to use an accounting period of 12 months’ duration which ends
    1. in that part of Period 1 which is on or after 1 February 2020 or
    2. in the month immediately following Period 1,

the tax due and payable by the accountable person for that accounting period under the Financial Provisions (Covid-19)(No. 2) Act 2020 shall be treated as Covid-19 liabilities.

(13) Subsection (13) provides that –

  1. the Minister may, in order to mitigate the adverse economic consequences resulting or likely to result from the spread of Coviid-19, by order specify a day for the purposes of ending the period involved in Period 2,
  2. the date specified by the Minister shall not fall after 31 December 2022, and
  3. any order made under this subsection shall be laid before the Dail in the usual manner and if a resolution is passed by the Dail annulling the order, this must be done within 21 days of the order being presented but without prejudice to the validity of anything done previously done thereunder.

Relevant Date: Finance Act 2020