In early May the Government announced that it will legislate to allow Revenue to warehouse deferred tax debts associated with the COVID-19 crisis.
This means that for the moment, and for 12 months after a business resumes trading, there will be no interest charged on unpaid VAT and PAYE tax bills that arose from the COVID-19 crisis. After this time there will be a lower interest rate of 3% per annum on the repayment of these outstanding warehoused tax debts.
Tax clearance will not be affected by a business availing of tax debt ‘warehousing’ under this arrangement.
Any tax refunds that may be due during this period will be repaid in full and not offset against the warehoused debts albeit businesses can choose to use these refunds to reduce the amounts owed should they so wish.
There will be three periods in the scheme:
COVID-19 restricted trading phase - where the business is unable to trade or was subject to restricted trading, and debts for an additional two months after the business re-commences ‘normal’ trading.
There will be no collection of any of the debt in question during this period and no interest will apply, but the liabilities must be declared on time by filing the appropriate tax returns.
Period 1 may vary from sector to sector and business to business, depending on when Government restrictions are relaxed in line with the roadmap for re-opening society and business as announced
on May 1st
Zero interest phase - This will last for 12 months after the end of Period 1.
During this period no interest will be charged on the debt built up in Period 1. Businesses must pay current tax liabilities as they arise.
Reduced interest phase - This will last from the end of Period 2 until the COVID-19 related debts built up in Period 1 are paid.
A reduced interest rate of 3% per annum will be charged on the debt from Period 1. This compares to a rate of 10% per annum normally or otherwise due on overdue VAT and PAYE.
If you want to find out more on this scheme, please contact us.