In response to the significant financial challenges faced by businesses as a result of Covid-19, the Government has legislated to allow for debts associated with the pandemic to be deferred or “warehoused”. The scheme allows for VAT and PAYE liabilities arising in the crisis to be deferred for a period of 12 months. If the debts are not discharged within twelve months, the interest of the late payment of taxes will apply at the reduced rate of 3%.
The scheme contains three distinct phases:
- Phase 1 (“Restricted Trading Phase”)
This covers the period when the business first experienced cash-flow trading difficulties arising from the impact of Covid-19. For VAT, this will be the bi-monthly VAT period commencing on 01 January 2020, and for PAYE, the payroll period commencing on 01 February 2020. The period will end on the last day of the first bi-monthly VAT taxable period which starts after the business has recommenced trading. Interest in respect of the late payment of taxes will not be charged during this period.A business will be deemed eligible to resume trading following the easing of restrictions as set out in the Government’s Roadmap for reopening society. Alternatively, this date can be deferred if the business can demonstrate that it did not open on the date the restrictions were eased.
- Phase 2
This phase will commence at the end of Phase 1 and will last for one year. No interest will be charged on the “warehoused” debt during this period. Customers must contact Revenue with their repayment plan before the end of Phase 2. - Phase 3
The last phase will commence on the first day following the end of Period 2 and continue until all “warehoused” Covid-19 debts from Phase 1 are discharged. Interest in respect of the late payment of taxes will be computed using the following formula: DL*D*P
DL= The amount of Covid-19 Debts that remain unpaid at the start of Phase 3
D= Number of days forming Phase 3, and
P= 0.0082 per cent (3% per annum)
Examples
| Month Business Resumes | Liabilities to be warehoused (“Covid-19 liabilities) | Phase 1 9Covid 19 Restricted trading phase-0% Interest on Covid-19 Liabilities) | Phase 2 (0% Interest on Covid-19 Liabilities on Covid-19 liabilities) | Phase 3 (reduced Interest Phase-3~% Interest on Covid-19 Liabilities)
|
| June 2020 | VAT January -August 2020
PAYE February – August 2020 |
01 January 2020 (VAT)/ 01 February 2020 (PAYE)-31 August 2020 | 1 September 2020- 31 August 2021 | 01 September 2021 until all Covid-19 Liabilities are paid in full |
| October 2020 | VAT January -December 2020
PAYE February – December 2020 |
01 January 2020 (VAT)/ 01 February 2020 (PAYE)-31 December 2020 | 1 January 2021- 31 December 2021 | 01 January 2022 until all Covid-19 Liabilities are paid in full |
Eligible Businesses
Small to medium-sized enterprises (a turnover <€3M) will automatically qualify for the scheme. Revenue has commenced “warehousing” the debts of such businesses and contact will be made through ROS to confirm eligibility. If Revenue have failed to contact the business before the 1 October 2020, the business is encouraged to contact Revenue.
For larger businesses, whose annual turnover exceeds €3M, they will not automatically qualify for the scheme. However, if they are unable to discharge their Covid-19 liabilities, they can apply to their Revenue district office or the Collector General. Subject to Revenue approval these businesses may be included as part of the warehousing scheme.
Taxpayers Obligations
Eligibility for the warehousing of tax debts is conditional on the filing of all tax returns and the payment of all tax liabilities that fall due for the current periods and any subsequent payment arrangement. If the business encounters additional cash-flow difficulties, resulting in the business not being in a position to discharge its current liabilities, the taxpayer must notify Revenue as soon as possible.
In addition, any business that has additional tax liabilities that have not been declared to Revenue in the appropriate tax return (due to an error or omission) will not be entitled to participate in the scheme until their tax affairs are regularised.
If the business fails to meet its required pay and file obligations, the reduced interest rates of 0% (while in warehouse) and 3% (after the warehouse period ends) will not apply, and the standard interest rate will be reintroduced.
Tax Clearance & Liquor Licences
VAT and PAYE liabilities have been “warehoused” will not impact on a business’s ability to renew a liquor licence. Likewise, the warehousing of VAT and PAYE debt will not impact on a company’s ability to claim tax clearance.
Tax Refunds/ Repayments
Revenue have confirmed that refunds and repayments arising in the “warehoused” period will be repaid, regardless of the fact that the business will have tax debt under the scheme, However, a business can request for the tax refund/ repayments to be offset against the warehoused debt.