Who’s in the house? Debt’s in the (ware) house!
Following on from the multiple economic changes that have come about following the Covid-19 pandemic we have spoken multiple times about the concept of “Debt Warehousing” and the availability of same for Irish businesses hit by the emergency. With restrictions recently fully lifted, the past number of weeks has been a busy one for many Irish businesses. We are now beginning to see signs of a strong recovery, allowing many businesses to begin once again hitting the ground running after a stressful period.
A great many companies have been in some way “saved” by Government assistance during the Covid-19 period that may otherwise have had to close their doors. One of the most popular options, next to the EWSS was the concept of debt warehousing. It was recently confirmed that up to €3.2billion in tax debt is currently being warehoused by Revenue for businesses financially affected by Covid restrictions, primarily large and medium-sized businesses.
These debts are currently warehoused under the understanding that they will remain parked interest-free with no requirement to begin payback until at least January 2023, with a spokesperson for Revenue recently confirming:
“There is no requirement to pay for most businesses until at least January 2023. At the end of the period, a tailored plan will be agreed with the businesses appropriate to their economic circumstances at that time.”
Some companies have already begun to pay off their warehoused tax debt due to the financial improvements gained from coming out of the lockdown periods. For companies that haven’t yet begun to pay, it is important to note that an interest rate of 3% per year will begin to apply from 2023. This remains a discount from the usual 8% interest rates that would apply to late tax payments. It is also important to stress that Revenue wants a business with tax debt to have engaged and proposed a repayment plan by the end of 2022.
While there remains some controversy with the scheme, with some thinking that more allowances should be made for struggling companies in terms of a tax write off or similar as the payback time looms closer, and others believing that the scheme is already too lenient and creates a level of unfairness in the market, there is no denying that the scheme has provided a massive level of assistance where needed.
At this moment of time, Revenue have confirmed that they have no plans to entirely write off these debts.
We hope that this information has been useful for you and as always, please don’t hesitate to contact us here at EcovisDCA where we remain open and ready to help. Please do not hesitate to contact us.