Interest rate on Warehoused Tax Debt reduced to 0%
In keeping with the many changes to taxation incurred in recent years, The Minister for Finance has recently announced that the interest rate on Warehoused Tax Debt has been reduced to 0%. This comes on the heals of many businesses (particularly in the hospitality sector) closing their doors in recent months, citing exponential pressures as the cause.
The Tax Debt Warehousing Scheme was introduced for businesses following the Covid-19 Pandemic, which continues to impact the Irish Business Landscape to this day. The scheme was intended to help businesses experiencing cash flow issues, allowing them to defer payment of some tax liabilities until their cashflow situation improved. Where there was once €3billion owed in tax debt by 110,000 businesses, there is currently €1,72 billion owed by 57,500 businesses under this scheme.
Revenue have confirmed that any businesses who have already paid their warehoused debt at the previous interest rate of 3% will receive a refund of that interest. Revenue have also stressed that there are “flexible payment options available” in respect of warehoused debt in the hopes that more businesses will find themselves in a position to begin clearing this debt. These flexible options include the extension of the payment term beyond the usual 3–5-year term. These decisions will be made on a case-by-case basis.
Minister McGrath has said that “The 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.”
The Finance Minister will be bringing forward legislation to formalise this 0% interest rate change, but Revenue will implement it administratively in the meantime.
All businesses availing of the Tax Debt Warehousing Scheme must engage with Revenue before May 1st, 2024, to either pay their debt in full or discuss a payment plan. All businesses must also file their current tax returns on time and meet current tax liabilities while availing of this scheme.
As always, our advice is to keep ahead of all tax affairs to ensure full compliance, and the key take away here is engagement with Revenue. Rather than the “head in the sand” approach, it is essential to keep in touch with Revenue and arrange payment plans as needed.