Tax Debt Warehousing

The Government is to legislate for a warehousing of VAT and payroll taxes debts associated with the COVID-19 crisis. Pending the enactment of the necessary legislation, Revenue will operate the scheme on an administrative basis. In effect, the amounts deferred from March will be warehoused.

These new measures should apply automatically for SME’s, while they are available on request by larger corporates. For tax purposes, a SME is a business with a turnover of less than €3 million, which is not dealt with by either Revenue’s Large Corporate Division or Medium Enterprises Division.

Under the scheme, VAT and PAYE (Employer) tax debts deferred while a business is unable to trade or was subject to restricted trading due to the COVID-19 related health restrictions, as well as debts for an additional two months after the business resumes "normal" trading, will be ringfenced by Revenue. The scheme will have three periods, namely:

Period 1: COVID-19 Restricted Trading 

The restricted period is the period during which the business was and is unable to trade or was and is trading at a significantly reduced level, due to the COVID-19 related restrictions and two months after the business re-commences “normal” trading. All relevant returns for the restricted trading phase will need to be filed so that the debt can be quantified. If a “best estimate” return of liability has been made for any period, the correct return will have to be filed before the end of Period 1 to ensure the debt benefits from the warehousing. No interest will apply to these taxes for this period and debt enforcement will be suspended. Period 1 may vary from sector to sector and business to business, depending on when Government restrictions are relaxed, in line with the roadmap for re-opening society and business, as announced on 1 May 2020.

Period 2: Zero Interest Phase

Following a resumption of “normal” trading, the outstanding VAT and PAYE (Employer) tax debts will be warehoused for 12 months during which there will be no collection of this debt by Revenue and no interest will be charged. However, businesses will be expected to pay current liabilities as they arise during this 12-month period.

Period 3: Reduced Interest Phase

At the end of the “warehoused” 12-month period, a reduced interest rate of 3% will apply on the repayment of such warehoused tax debt until it is fully paid.

Tax Clearance will not be affected by a business availing of tax debt warehousing under this arrangement. In addition, refunds and repayments of tax which arise will also be paid, notwithstanding that the business owes VAT and PAYE (Employer) liabilities that have been warehoused. A business can choose to offset a refund/repayment against the warehoused liabilities if it wishes.

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