Ciarán Medlar features in the September edition of Business Plus magazine

16 September 2020

Ciarán Medlar, Head of Tax at BDO Ireland, was recently invited by the Business Plus magazine, as one of Ireland’s leading tax experts, to provide his insights on VAT/PAYE debt warehousing, accelerated loss reliefs, wage subsidies and what’s needed in Budget 2021 to boost the economy.

Reacting to the business challenges presented by the Covid-19 pandemic, Ciarán says that like many of our clients, BDO was suddenly faced with a number of new and different challenges. Ciarán comments that:

“Our experience is that we and our clients were faced with a three-stage process, to manage business priorities and leverage new thinking, this being React, Resilience and Realise”

Read Ciarán’s full commentary from the September edition of Business Plus below.

Warehousing Tax Debt

The “warehousing” arrangements consists of three phases. Phase 1 is the restricted trading phase. Tax debts built up while the business was unable to trade or was subject to restricted trading and debts for an additional two months after the business re-commences “normal” trading, will be ring-fenced.

In Phase 2, following recommencement of “normal trading, outstanding VAT and employer PRSI tax debts will be warehoused for 12 months. During this time no interest will be charged.

Phase 3, the reduced-interest phase, at the end of the 12-month period, sees a reduced interest rate of 3% applied.

The tax debt will have to be qualified by the business through the filing of all relevant returns for the restricted trading phase. As some pattern to business re-emerges, the repayment of deferred and warehoused debt will need to be constantly reviewed.

Wage Subsidies

The real-time implementation of a very complex TWSS by Revenue is to be applauded for how it dealt with the immediacy of the challenge facing employers. It is hoped that Revenue will adopt a pragmatic multi-year approach when collecting any deferred tax liabilities for employees included in the TWSS.

Corporation Tax-Loss Relief

In order to avail of this, a business must have fully met its filing obligations in the preceding accounting period, be generally tax compliant and make a declaration that it has incurred a loss, or interestingly, reasonably expects to do so, in the specific accounting period. The basis of the expected loss is likely to be subject to verification checks from Revenue.

Stay & Spend Tax Credit

This is a very positive initiative, previously proposed by my colleague Austin Hickey, Director. As we are all aware, the hospitality and tourism industries have been hit badly, so initiatives to assist with tourism are greatly welcomed.

Budget 2021

Budget 2021 should consider the introduction of an export credit insurance scheme, similar to schemes in the EU and the UK. This would assist the agri-food and drinks sectors. Another measure to consider would be a review of reducing the current 13.5% VAT level.

Content adapted from The September issue of Business Plus magazine