31 May Revenue confirm Debt Warehousing Scheme still in operation as businesses reopen
In a press release on 26th May, Revenue reminded businesses who have resumed, or will shortly resume trading that the Debt Warehousing Scheme is still in operation and there is no immediate requirement to pay the tax debts that have been ‘parked’ under the scheme. These businesses are still in Period 1 (“the Covid restricted trading phase”). Period 2 (“the zero interest phase”) commences two VAT months after the business resumes trading. For example, this means that Period 1 continues for shut businesses that reopen in May or June until 31 August 2021, while Period 2 will run from 1 September 2021 until 31 August 2022 for such businesses.
As Period 2 comes to an end, businesses will be required to agree a future payment arrangement with Revenue for the warehoused tax debt. Revenue notes that the timeframe allowed to pay the warehoused debt will be flexible and determined by the capacity of the business to pay these arrears, while also paying current tax liabilities as they arise in the normal course.
Collector-General, Mr. Joe Howley confirmed that, “We will be in contact with each business that is availing of the Debt Warehousing Scheme to explain how the arrangements will operate for their business. The flexibility around debt that is warehoused will allow businesses additional time to get back on their feet after re-opening.”
Revenue also reminds taxpayers that a key condition for businesses to continue to avail of the Debt Warehousing Scheme is that all tax returns must be filed as they fall due, even where the liability is nil.
However it must be noted that the interaction of the Debt Warehousing Scheme with section 997A TCA 1997 has the significant impact of denying a credit for PAYE withheld from remuneration paid to a director or employee within the remit of section 997A, where the employer’s PAYE is warehoused.
Revenue has stated that the legislation is very clear and does not permit a credit for unpaid PAYE for those subject to section 997A where that PAYE has not been remitted to the Collector General. Revenue’s Manual Credit in respect of Tax Deducted from Emoluments of Certain Directors and Employees outlines the order in which PAYE remitted by an employer will be credited to employees and directors, in accordance with the legislation in section 997A.
Therefore, if the employer’s PAYE liability cannot be paid before the income tax filing deadline, affected taxpayers may need to consider whether they qualify for income tax debt warehousing or seek to arrange a Phased Payment Arrangement with Revenue.