Background of Debt Warehousing & Interest Suspension

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.

Legislation underpinning the tax measures announced in the July Jobs Stimulus in July 2020, 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 (TWSS) 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 which set 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, the Minister for Finance confirmed that the period of time during which tax debts could be warehoused was extended until the end of December 2021 for all eligible taxpayers, and the scheme was extended to cover overpayments of the Employment Wage Subsidy Scheme (EWSS).

The Finance (Covid-19 and Miscellaneous Provisions) Act 2021, which includes the amendments to the Debt Warehousing Scheme announced in the Economic Recovery Plan 2021, was signed by the President of Ireland, Michael D. Higgins on 19 July 2021. The Act inserted a new section 28D into the Emergency Measures in the Public Interest (Covid-19) Act 2020 to provide for warehousing of EWSS overpayments received by employers which must be refunded to Revenue.

The Act also gives effect to the extension of the Debt Warehousing Scheme for refunds of TWSS payments, PAYE, income tax, VAT and PRSI, as follows:

• Period 1 (the “Covid-19 restricted trading phase”) will run from 1 July 2020 until 31 December 2021
• Period 2 (“the zero interest phase”) will run from 1 January 2022 until 31 December 2022 during which no interest will be charged on warehoused relevant tax from Period 1; and
• Period 3 (the reduced interest phase) will run from 1 January 2023 until the relevant tax is repaid to Revenue. During Period 3, interest will be charged at 3% per annum on warehoused relevant tax from Period 1.

On 21 December 2021, in light of the newly announced public health restrictions, the Minister for Finance announced an extension to the Debt Warehousing Scheme to assist businesses impacted by the COVID-19 public health restrictions. Period 1 (the Covid-19 restricted trading phase) i.e., the period for which tax liabilities arising can be warehoused, was extended to 31 March 2022, where certain criteria are satisfied.

On 21 January 2022, the Government extended this period by one month to 30 April 2022. The extension to the Debt Warehousing Scheme will apply to those businesses entitled to and who have made a valid claim for a relevant Government COVID-19 Support Scheme during the period from 1 January 2022 to 30 April 2022. The relevant Government COVID-19 Support Schemes would include the EWSS and/or the CRSS.

The extension applies to the Period 1 end date for all taxes that the taxpayer has warehoused up to the end of April 2022. Period 2 (the zero-interest phase) of the Debt Warehousing Scheme for these taxpayers will now run from 1 May 2022 until 30 April 2023. Period 3 (the reduced interest phase) will run from 1 May 2023.

The extension to the Debt Warehousing Scheme will not apply to businesses that are not currently in receipt of one of the relevant COVID-19 Support Schemes. This means that the warehousing periods are unchanged for those businesses: Period 1 ended on 31 December 2021; Period 2 began on 1 January 2022 and will end on 31 December 2022. Period 3 will begin on 1 January 2023.