Tax Debt Warehousing: Parking of unpaid VAT & PAYE arrears

In early May 2020 the Government announced that it would legislate to allow Revenue to warehouse deferred tax debts associated with the COVID-19 crisis. 

During the pandemic, 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:

Period 1 - 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 01 May 2020

Period 2 - 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.

Period 3 - 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.

 

Updates to the Scheme

 

12-month extension

On Monday 17 October 2022 Revenue announced a 12-month extension to the Tax Debt Warehousing Scheme.

Businesses with warehoused debt were due to enter into an arrangement with Revenue to deal with that debt by the end of 2022 (or by 01 May 2023 for those subject to an extended deadline).

Revenue has now extended that deadline to 01 May 2024. Businesses will not have to clear the debt in the warehouse (or enter into a phased payment arrangement to clear the debt) until 01 May 2024.

Taxpayers will still be able to avail of the reduced 3% interest rate from January 2023, rather than the general interest rate of 10%, when paying the warehoused debt.

 

Interest rate reduced to 0%

In February 2024 the Minister for Finance announced that the interest rate on Warehoused Debt will be recuded from 3% to 0%. 

If you have Warehoused Debt you still need to engage with Revenue by the 01 May deadline. By this date the debt needs to be paid or you need to enter into a phased payment arrangement with Revenue to clear the debt. Read more

 

 

Date published 14 May 2020 | Last updated 6 Feb 2024

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.