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. 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.
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 November 2020, Revenue will be writing to businesses that qualify for the debt warehousing arrangement about the tax liabilities that have been warehoused. Taxpayers with outstanding returns will be 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 issuing from Revenue are available below:
October 2020 – eBrief No. 190/20: Budget 2021 – Income Tax Warehousing