Business

Interest on warehoused business tax eliminated, benefiting 57,000 companies

Minster for Finance removes interest charged on warehoused tax

Minister for Finance Michael McGrath announced a number of changes to how the tax warehousing scheme is implemented. Photograph: Gareth Chaney/Collins

Arthur Beesley
Mon Feb 5 2024 - 19:21

Minister for Finance Michael McGrath has eliminated the interest charged on €1.72 billion in warehoused business tax, in a move that will benefit more than 57,000 companies with tax outstanding since the Covid era.

In a parallel move on Monday, the Revenue said it would repay any interest companies had already paid since the 3 per cent annual interest charge was imposed on warehoused debt.

The move follows warnings from business lobby groups that demands for such taxes to paid could lead many small and medium-sized companies into insolvency.

“This Government is acutely aware of the ongoing cost pressures faced by businesses and is determined that viable businesses are given every chance to succeed in a challenging trading environment,” Mr McGrath said in a statement.

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The warehousing scheme is one of the legacies of successive Covid-19 pandemic lockdowns, when the Government shut large sectors of the economy to prevent the spread of disease.

The arrangement allowed businesses to defer VAT, employer PAYE and certain self-assessed income tax liabilities. It also covered debt built up from temporary wage subsidy and employment wage subsidy overpayments.

The total tax debt deferred since the pandemic has dropped by €1.4 billion since January 2022 to €1.72 billion this week, with the number of businesses affected falling from a peak of about 105,000 to 57,435.

Although annual interest at 3 per cent was applied on such debt after an interest-free period, Mr McGrath has now resolved to cut the rate to zero. The usual interest rate on unpaid tax is 10 per cent.

“I will be bringing forward the necessary legislation to give effect to this and Revenue has confirmed that it will implement the zero per cent on an administrative basis in the meantime,” the Minister said.

“Where a business has already paid warehoused debt, which was subject to interest at 3 per cent, it will get a refund of that interest. This will ensure that all taxpayers are treated fairly.”

The Revenue said companies availing of the warehouse have until May 1st this year to pay the debt in full or engage with the tax authority to address the liability, including by way of a phased payment arrangement.

Joe Howley, the collector general, said more than 2,100 businesses have already entered payment arrangements with the Revenue for some €158 million of warehoused debt.

“The debt warehouse scheme was an unprecedented measure introduced in an exceptional period to give viable businesses an opportunity to survive an emergency,” Mr Howley said.

“Many of the businesses involved had never before built up debt with Revenue. We are firmly committed to supporting viable businesses that have warehoused debt.”

Companies availing of the warehouse are required to file current tax returns and pay current liabilities as they fall due.

The tax authority has warned that any business not meeting such conditions would have their warehouse facility revoked, resulting in the standard 10 per cent interest rate being imposed on their debt and backdated to when the debt arose.

In addition, the Revenue said it would seek immediate enforcement of all outstanding debt including interest in such circumstances.

“The key message is that businesses should engage with Revenue,” Mr McGrath said.

Arthur Beesley

Arthur Beesley

Arthur Beesley is Current Affairs Editor of The Irish Times

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