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Tax debt warehousers should feel the need for speed as the 1 May deadline is coming in hot

I’ve previously written in these pages about tax debt warehousing. Now time really is of the essence when it comes to engaging with Revenue if you’re in the tax debt warehouse right now. 

These debt warehousing provisions were brought about as a result of Covid19 allowing certain tax liabilities to be put into cryostasis until a future date. It allowed businesses to temporarily defer payment of VAT and employer PAYE, certain income tax liabilities, and Temporary Wage Subsidy Scheme (TWSS) and Employment Wage Subsidy Scheme (EWSS) overpayments on an interest-free basis. Right now, the rate of interest for such warehousers should be 3% however on 5 February 2024, the Minister for Finance announced that the interest rate applicable to warehoused debt would be reduced to 0%. However, it is a condition of the Debt Warehouse Scheme that either the amounts in the debt warehouse are paid in full or a viable application for a Phased Payment Arrangements (PPA) is applied for before 1 May 2024. 

The point is made that Revenue will operate the above on an administrative basis pending the legislative change. Put another way the law behind this will come later, just ensure that you’ve engaged so that you can continue to have the warehouse benefits. This doesn’t happen often where the law comes after its effective date, so this really highlights the need for speed on this one. As I’ve noted in these pages before, and above, we should be in the 3% interest rate phase of the warehouse but given the above change, the guidelines restate the previously announced position that Revenue will also issue refunds of any interest already that has already been paid at the 3% interest rate by businesses on warehoused debt. 

Revenue recently updated their guidelines for PPAs. The guidelines explain that in order to benefit from the 0% interest rate on warehoused debt, taxpayers availing of the Debt Warehousing Scheme have until 1 May 2024 to either (1) pay their warehoused debt in full, or (2) “meaningfully engage” with Revenue on addressing the debt, including applying for a PPA online via Revenue’s Online Service (ROS).  They continue that submission of a PPA application, prior to 1 May 2024, offers flexibility for managing the payment of warehoused debt including the level of down-payment to commence a phased payment arrangement, an extended payment duration where necessary and the availability of payment breaks and payment deferrals if temporary cash flow difficulties arise during the arrangement term. 

Where a taxpayer already has a PPA in progress, additional periods, including periods covered by Debt Warehousing and amendments (increases and decreases) to tax liabilities on periods already included in an existing PPA, can be incorporated into that PPA. They refer to this process as “PPA Consolidation”.

Of course, there is a quid pro quo here in that businesses must keep up to date with filing their current tax returns and paying their liabilities as they fall due to keep the benefits of the Debt Warehousing Scheme. Then the guideless drops the hammer saying, “If businesses do not continue to meet these conditions, the warehouse should be revoked and debts which had been warehoused, will become payable immediately, may be subjected to debt collection enforcement action, and will be subject to interest charges of 8% or 10% per annum”.  

Let’s just stop here for a second. You have the option of paying interest at the above rates depending on your actions. As Minister for Finance Michael McGrath said earlier this week, “It is important to note that, businesses are not required to pay all of their warehoused debt by 1 May 2024. However, in order to avail of the 0% interest and flexible payment options, they are required to engage with Revenue to make arrangements to pay the debt over an agreed period of time, based on their individual circumstances and capacity to pay”.  

The guidelines explain that only taxpayers with debts greater than €500 (Tax, Interest and Penalties combined) can make an on-line application for a PPA. All applicants are required to submit a PPA application along with any required supporting documentation by way of upload through ROS. The documentation requested varies depending on the level of debt outstanding. They continue that taxpayers are advised that Collector General Caseworkers will respond to PPA applications within 10 working days. Therefore, the guidelines note that Collector General Caseworkers and Managers should deal with all applications as quickly as possible and that applicants should be notified swiftly of any issues requiring clarification or any additional information required.  

Further, a PPA application cannot be initiated by the taxpayer where that taxpayer has outstanding tax returns, as all applications need to address the total liability, i.e., all outstanding tax, full interest, and any outstanding penalties. Where returns are outstanding, the ROS system prevents the taxpayer proceeding with the application and notifies them of the returns that are required.

Further, the guidelines note that the taxpayer must demonstrate that the business is viable and has the capacity and commitment to meet all future tax payment obligations when due. A key indicator for a viable business is the ability to maintain its current taxes as they fall due. Again, the granting of the PPA is “significantly influenced by the level and timeliness of meaningful engagement with Revenue”.  

The PPA guidelines manual is 32 pages long so it’s not possible to summarise all that in one column, but it is required reading for entering into a PPA. But no PPA engagement before 1 May 2024 and then the interest rate on previously warehoused debts goes up.  

As I’ve said before in these pages, if you’re within the warehouse then Revenue encourage the need for speed in engaging with this process given the deadline is inbound.    

Please note this article first featured in the Business Post on Sunday, 21 April 2024 and was re-published kindly with their permission on our website.