Tax Debt Warehousing and Company Directors

The Government introduced Tax Debt Warehousing for businesses last year. This meant that qualifying businesses could “park” their VAT and payroll tax liabilities which arose during COVID-19. No interest is charged on this debt for a period of up to 12 months after the business resumes trading. After this time there will be a lower interest rate of 3% per annum charged on these outstanding warehoused tax debts until such time as they are repaid.

Tax Debt Warehousing and Company Directors

Revenue have recently confirmed, however, that a director or employee with a material interest in the company cannot claim credit for PAYE deducted if the company has warehoused and not paid those payroll taxes. A material interest is somebody who can control, directly or indirectly, 15% of the ordinary share capital of the company.

What does this mean for Directors?

In essence this will mean that when a director completes their income tax return for 2020 later this year they cannot claim a credit for the PAYE deducted from their salary if the company has warehoused the payroll taxes. This may lead to an unexpected income tax bill to pay.

What should Directors do now?

Revenue have confirmed that directors who are eligible for Tax Debt Warehousing in their own right may be able to warehouse these liabilities but this still means that the liability for these taxes has shifted from the company to them personally.

If you are a company director or employee who may be affected by the above we suggest you contact your accountant for advice on what tax liabilities may arise for you personally when you file your 2020 tax return. 

 

At TaxAssist Accountants we offer a free initial consultation to potential clients. Contact us today. 

 

 

Date published 14 Apr 2021 | Last updated 15 Apr 2021

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.