By Robert Lohan, Tax Director, DHKN
Revenue’s Debt Warehousing Scheme (DWS), established at the start of the pandemic, allowed businesses to defer payment of taxes until activity levels returned to some level of normality.
Any unpaid debt has been interest free so far and is due to start incurring interest at 3% from 1 January or 1 April next.
Recent changes
In October Revenue announced an important and significant extension to the Debt Warehousing Scheme. Under the scheme, businesses with warehoused debt were due to enter into an arrangement with Revenue to deal with that debt by the end of the year (or by 1 May 2023 for those subject to the extended deadline).
Given the current economic uncertainty, Revenue has extended the timeline to 1 May 2024. This means that warehoused debt will continue to benefit from a reduced 3% rate of interest until 1 May 2024 by which time taxpayers will have to either clear the warehoused debt or enter into a phased payment arrangement to clear the debt.
The phased payment arrangement for warehoused debt was planned to start on 1 January next and this postponement gives businesses more time to address the issue.
This is welcome news for many businesses struggling to deal with the high inflation, rising interest rates and significant economic uncertainty.
What do you need to do?
Businesses may repay any or all of the warehoused debt at any time before 1 May 2024 or enter a phased payment arrangement and still avail of the reduced interest rates on this debt.
However, to avail of the extended term, taxpayers must continue to file their current tax returns and pay current taxes as they fall due. This has always been Revenue’s requirement for eligibility to the DWS: current returns for PAYE/PRSI/USC, VAT, etc. must be filed on time and paid as they fall due.
9,400 businesses which have not filed or paid their current taxes, have had their access to the scheme revoked and are immediately liable for all their Revenue debt – including the warehoused element – and will incur interest of 8% to 10% on the outstanding amounts.
As long as your business files its current returns, and settles any liabilities as they fall due, it should remain eligible for the DWS.
Disclosure of additional liabilities
In recent correspondence to taxpayers, who availed of the DWS or were eligible to participate in the scheme, Revenue offered the taxpayers the opportunity to self-review their returns and, if necessary, make an unprompted qualifying disclosure of undeclared liabilities in the tax periods that were eligible for warehousing.
This is an opportunity for those who were eligible for DWS to regularise their tax returns for any undeclared tax liabilities in the DWS periods.
For example, a review of your tax returns for the period covered by the DWS could reveal an innocent error in calculation of a liability.
By making an unprompted qualifying disclosure to Revenue no later than 31 January 2023, a taxpayer will benefit from mitigation of tax penalties, non-publication and they will not be prosecuted in this instance.
Any additional tax liabilities identified will also be eligible for the DWS and will benefit from the reduced 3% rate of interest.
Following this, should Revenue identify tax defaults in the DWS periods, the taxpayer should expect to become ineligible for the DWS, and all outstanding liabilities may become subject to immediate collection with the standard 8 – 10% rates of interest applying depending on the particular tax head, with potential penalties also arising.
If you have any queries in relation to taxation and debt warehousing, please contact your regular relationship manager or me at rlohan@dhkn.ie.
