Tax Debt Warehousing Scheme

In early February the Minister of Finance announced changes to the Tax Debt Warehousing scheme. Can you outline these changes, the Revenue Commissioners renewed approach and the implications for companies that have availed, or continue to avail, of the scheme?

On 5 February 2024, the Minster for Finance announced significant changes to the Tax Debt Warehousing Scheme. The Tax Debt Warehousing Scheme was originally introduced to allow businesses who experienced trading difficulties during the Covid-19 pandemic to defer paying certain PAYE and VAT liabilities until they were in a better position financially. Originally, the scheme allowed for businesses to defer these liabilities on an interest-free basis for a certain period of time, and thereafter at a reduced 3% interest rate. More than €3 billion of debt belonging to more than 105,000 businesses has been deferred during the lifetime of the Debt Warehousing Scheme.

The key change announced on 5 February in relation to the scheme was that the Government were reducing the interest rate applicable on the warehoused debt from 3% to 0%. They have also confirmed that they will issue refunds of any interest at 3% that had already been paid by businesses on their warehoused debt. The legislation to effect the recently announced changes to the Debt Warehousing Scheme will be brought forward shortly. However, Revenue have confirmed that they will operate the 0% interest rate on an administrative basis pending the legislative change.

It is important to note that although the interest rate on the warehoused debt has been reduced to 0%, businesses must still engage with Revenue on addressing the warehoused debt by either paying the warehoused debt in full or agreeing a Phased Payment Plan with Revenue in relation to the debt by 1 May 2024. Revenue have signalled that they will take a flexible approach in relation to the repayment of the warehoused debt which will include the possibility to extend the duration of payment plans beyond the typical three-to-five-year period on a case-by-case basis.

In order to remain in the Debt Warehousing Scheme and benefit from the 0% interest rate, businesses must continue to file their current tax returns and pay current tax liabilities as they fall due. Where a business does not meet these conditions, they will be removed from the Debt Warehousing Scheme and the tax liability for periods which had been warehoused will become payable immediately, may be subject to debt collection enforcement action and will be subject to interest charges of 8% or 10% per annum. 

The recently announced changes will provide a welcome boost for the circa 58,000 businesses who remain in the Debt Warehousing Scheme. However, it is critical that businesses continue to satisfy the conditions to qualify for the Scheme in order to avail of the 0% interest rate.

Contributor: Lee Kavanagh, Assistant Manager, Financial Services Tax

Content adapted from Finance Dublin's The Irish tax Monitor.