Debt Warehousing

Overview 

Revenue recently issued new guidance surrounding the debt warehousing of VAT, PAYE and Income Tax liabilities arising during a specified period of time and also the recovery of any overpayment of amounts received under the Temporary Wage Subsidy Scheme and Employee Wage Subsidy Scheme. We have set out a summary of the updated guidance below.  

Details of the Scheme VAT and PAYE 

All VAT and PAYE liabilities arising during the pandemic can automatically be warehoused up until 31 December 2021 without the application of interest for businesses dealt with in the Personal and Business Division of Revenue. Businesses dealt with by the Large Corporates and Medium Enterprises Divisions of Revenue would need to apply to Revenue for inclusion in the scheme due to a reduction in trade.  There are 3 distinct periods outlined in the scheme;

• Period 1 - COVID-19 restricted trading phase

This period begins since the company first experienced cash flow trading difficulties due to the pandemic. For VAT this can apply as early as 1 January 2020 and for PAYE this can apply as early as 1 February 2020. This period ends on 31 December 2021.  Relevant tax debts incurred during this period can be warehoused. Relevant debts include the VAT and payroll liabilities arising when the business was restricted by the Covid pandemic (i.e. either stopped or significantly reduced).  During this period the interest rate being applied to unpaid liabilities is 0%. 

• Period 2 – Zero interest period

This period runs from 1 January 2022 to 31 December 2022. During this period, the Interest rate being applied to unpaid liabilities is 0%.

• Period 3 – Reduced interest period

This period begins in January 2023 and ends when the liabilities are paid. Interest at a rate of 3% is applied during this time.  Anyone availing of the debt warehousing scheme should contact Revenue with a repayment plan for warehoused debt before 31 December 2022. The repayment plan will be mutually agreed between Revenue and the taxpayer.  Returns should continue to be filed during this period. 

Income Tax

Income Tax payments which fell due on 31 October 2020 and those falling due on 31 October 2021, subject to certain criteria, can avail of the debt warehousing scheme. The Income Tax liabilities affected are the 2019 Income Tax year balancing payment, Preliminary Tax and balancing payment for the 2020 Income Tax year and Preliminary Tax for 2021 Income Tax Year.  A declaration must be made to Revenue at the time of filing the return that total income for 2020 and 2021, as applicable, is expected to be at least 25% less than total income for 2019. The Income Tax Warehousing scheme contains 3 distinct periods, as follows;

• Period 1 - COVID-19 restricted trading phase

This period runs from 31 October 2020 for paper returns or 10 December 2020 returns filed on ROS (in relation to their 2019 income tax returns) until 31 December 2021. This also applies for 2020 income tax returns that are due for filing on 31 October 2021 for paper returns and 17 November 2021 for returns filed on ROS.

• Period 2 - Zero interest period

This period runs from 1 January 2022 to 31 December 2022. During this period, the Interest rate being applied to unpaid liabilities is 0%.

• Period 3 - Reduced interest period

This period begins in January 2023 and ends when the liabilities are paid. Interest at a rate of 3% is applied during this time.  Anyone availing of the debt warehousing scheme should contact Revenue with a repayment plan for warehoused debt before 31 December 2022. The repayment plan will be mutually agreed between Revenue and the taxpayer. Income Tax Returns should still be filed before the filing deadlines of 31 October 2021 for paper returns or 17 November 2021 for returns filed on ROS. 

TWSS and EWSS 

The TWSS/EWSS warehouse scheme is available to employers who are obliged to refund amounts which are deemed to be overpayments of TWSS/EWSS following a reconciliation process undertaken by Revenue, and who are unable to refund these amounts because of the impact of COVID-19. The warehousing scheme for TWSS and EWSS is the same as the warehousing scheme put in place for PAYE & VAT. One of the most important aspects of the scheme for businesses is to ensure all tax returns are kept up to date while availing of the scheme. It is also important to monitor the interest free period as a payment arrangement would need to be put in place with Revenue in advance of the end of Period 2. Our tax team can help with all compliance requirements and liaising with Revenue while our corporate finance team can assist on cash flow management in order to assist on putting a payment schedule in place.