The Government announced on 2 May 2020 that it would legislate to provide that Revenue would warehouse deferred VAT and payroll taxes debts associated with the Covid-19 crisis. Pending the enactment of the necessary legislation, Revenue operated the scheme on an administrative basis.
On 23 July 2020, the Government announced the July Jobs Stimulus 2020, which provided for several measures to boost the economy and get people back to work. Legislation underpinning the tax measures announced in the July Jobs Stimulus, the Financial Provisions (Covid-19) (No. 2) Act 2020, was passed by Dáil Éireann and signed into law by the President on 1 August 2020.
The Act provided for the legislation underpinning the measures of the tax debt warehousing arrangement and an extension of the reduced 3% per annum interest rate on warehoused VAT and payroll tax liabilities to other tax debts agreed before 30 September 2020.
The tax debt warehousing arrangement allows a business to park unpaid VAT and PAYE (Employer) tax debts, that arose from the COVID-19 crisis for a period of 12 months after a business resumes trading. No interest will accrue during this period and an interest rate of 3% per annum will apply on the repayment of these ‘warehoused tax debts’ after that date. The date on which a business is deemed to resume trading is by reference to the date when the business ceased to be subject to restrictions provided for in Regulations detailed in the Roadmap for Reopening Ireland (plus two additional VAT months).
The reduced interest rate of 3% per annum relating to tax debts not associated with COVID-19, applies where the taxpayers concerned enter into a phased payment agreement with the Collector-General before 30 September 2020. The 3% rate represents a significant reduction from standard interest rates on late payment of taxes of 8% and 10% per annum.
In a press release on 30 September 2020, Revenue confirmed the deadline to avail of reduced rate of interest on outstanding non-COVID-19 tax debts would be extended to 31 October 2020.
Finance Act 2020 extended the Debt Warehousing Scheme to include certain income tax liabilities for 2020 and 2021 for the self-employed and to include overpayments of Temporary Wage Subsidy Scheme payments by Revenue to employers.
In January 2021, Revenue confirmed that the Debt Warehousing Scheme remained available to support businesses experiencing tax payment difficulties arising from the COVID-19 Level 5 public health restrictions, which were to remain in place until at least 31 January 2021, however, in line with the Government’s COVID-19 Resilience and Recovery 2021 – The Path Ahead, Level 5 public health restrictions remained in place until mid-April 2021. In March 2021, Revenue wrote to taxpayers and agents in respect of businesses that had availed of debt warehousing to advise that the Debt Warehousing Scheme remained available to support businesses impacted by COVID-19 related trading restrictions.
On 1 June 2021, the Government launched the Economic Recovery Plan 2021. The Plan sets out a new phase of supports for the next stage of the economic recovery after the COVID-19 pandemic. As part of the measures announced in the Economic Recovery Plan, the Minister for Finance confirmed that the period of time during which tax debts can be warehoused will be extended until the end of December 2021 for all eligible taxpayers, and that the scheme would be extended to cover overpayments of the EWSS.
On 22 June, the Government published the Finance (Covid-19 and Miscellaneous Provisions) Bill 2021 which includes the amendments to the Debt Warehousing Scheme announced in the Economic Recovery Plan 2021. Section 7 of the Bill inserts a new section 28D into the Emergency Measures in the Public Interest (Covid-19) Act 2020 to provide for warehousing of Employment Wage Subsidy Scheme (EWSS) overpayments received by employers which must be refunded to Revenue. Sections 8, 9 ,10, 11 and 12 give effect to the announcement by the Government of the extension of the Debt Warehousing Scheme for refunds of Temporary Wage Subsidy Scheme (TWSS) payments, PAYE, income tax, VAT and PRSI, as follows:
The Finance (Covid-19 and Miscellaneous Provisions) Act 2021 was signed by the President of Ireland, Michael D. Higgins on 19 July 2021.
More information on these developments are included below.
The Institute is in ongoing engagement with Revenue on measures to help deal with cash-flow issues for businesses and on clarifications required on tax administration issues the COVID-19 pandemic presents for affected businesses and employees.
The Institute wrote to the Minister for Finance & Public Expenditure and Reform, Paschal Donohoe T.D., on 23 March 2020, seeking urgent measures to deal with the cash-flow difficulties for businesses and noting the wide-ranging tax administration and payment issues arising for businesses affected by the COVID-19 pandemic, previously submitted to Revenue on 19 March 2020.
On 23 July 2020, the Institute created a dedicated webpage on the tax debt warehousing arrangement to keep members up to date on Revenue Guidance on the operation of the warehousing arrangement as it was released.
The Institute held a Branch Network Online Event for members with Revenue on 2 September 2020, to hear topical updates from Revenue’s Personal, Business, Medium Enterprises and the Collector General’s Divisions. Revenue answered a number of queries from members including how to determine the end date for Period 1 (i.e. the period of restricted trading plus the next full bi-monthly VAT period) for businesses that did not close but have continued to trade since March, albeit at a reduced level, with employees often working remotely.
Revenue confirmed during the Branch Network Online Event that the debt warehousing period is aligned with the Government Roadmap for Reopening Society and Business. Businesses that did not close are categorised as resuming to trade in Phase 1 of the Roadmap (i.e. in May 2020). Period 1 for such businesses therefore ended on 31 August 2020.
Revenue published an Information Booklet on debt warehousing and reduced rate of interest for outstanding ‘non-COVID-19’ debts, which provides further information and guidance on both measures.
In a press statement issued on 17 September 2020, Institute President, Sandra Clarke, urged businesses to act now to save on interest charged on overdue tax.
At meetings with Revenue in September and October, the Institute raised the cash-flow difficulties for many self-employed due to the impact of COVID-19 and that these taxpayers could not avail of the extension to the Income Tax ROS Pay & File deadline (to 10 December) due to their inability to pay their income tax liabilities. We sought alleviation of the “late” surcharge in circumstances where taxpayers would be unable to meet their income tax obligations by the 31 October 2020 deadline.
On 7 October 2020, the Institute wrote to the Minister for Finance about the challenges in meeting the income tax filing deadline for Covid-19 impacted businesses who could not pay their income tax liabilities. We sought an extension to the deadline for filing their income tax returns for 2019 and forbearance for taxpayers who would be unable to pay their income tax liabilities by the due date. The Minister subsequently announced an extension to the Debt Warehousing Scheme to include the warehousing of certain income tax liabilities by the self-employed and to allow these taxpayers to avail of the extended Pay & File deadline. Finance Bill 2020, published on 22 October outlined the conditions applying to this provision.
The Institute has continually raised concerns with Revenue at TALC regarding the interaction of section 997A TCA 1997 with the Debt Warehousing Scheme for employers’ COVID-19 related PAYE liabilities. In addition, the Institute made representations on this issue to the Minister for Finance in our Pre-Budget 2022 and Pre-Finance Bill 2021 Submissions. Further to the Budget publication, Budget 2022 Tax Policy Changes, published on 12 October 2021, the Department of Finance has outlined the intention to allow self-assessed income taxpayers with employment income who have a material interest in their employer company to warehouse income tax liabilities relating to their Schedule E income in these circumstances, subject to the enactment of the Finance Bill. See further detail here.
We will continue to engage with the Department of Finance and with Revenue on the cash-flow difficulties and the tax administration and payment issues arising for businesses affected by the COVID-19 pandemic and we will update members on this webpage, on Twitter and in TaxFax.
In March 2021, Revenue wrote to taxpayers and agents in respect of businesses that availed of the debt warehousing to advise that the Debt Warehousing Scheme remained available to support businesses impacted by COVID-19 related trading restrictions. Samples of the letters issued by Revenue are available below:
March 2021 – Letter to taxpayers with returns outstanding and availing of CRSS or EWSS or both (tailored according to the taxpayers circumstances) including details of any debt warehoused and the returns outstanding
In November 2020, Revenue wrote to businesses that qualify for the Debt Warehousing Scheme about the tax liabilities that have been warehoused. Taxpayers with outstanding returns are reminded in the letter about tax returns that are outstanding and need to be filed to retain the debt warehouse status. Samples of the letters issued by Revenue are available below:
October 2020 – eBrief No. 190/20: Budget 2021 – Income Tax Warehousing
June 2021 – Economic Recovery Plan 2021
February 2021 – COVID-19 Resilience and Recovery: The Path Ahead
Department of the Taoiseach
June 2021 – Launch of the Economic Recovery Plan 2021
July 2020 – July Jobs Stimulus
Department of Finance