Covid debt interest rates slashed to 0%

THE restaurant sector was handed a major boost yesterday with the news that interest rates on Covid-era debts will be slashed to 0%.

Businesses that have paid the previous rate of 3% are set to be refunded, under plans announced by Finance Minister Michael McGrath yesterday.

Under the Government’s ‘debt warehousing’ scheme introduced during the pandemic, businesses were allowed to defer tax liabilities until they could afford to pay them. Those debts were originally due for payment this summer, sparking concern among struggling businesses.

Revenue will now allow the extension of repayment plans beyond the typical three to five-year duration on a case-bycase basis. The move comes amid backlash by business lobby groups who have said that multiple moves by the Government including minimum wage hikes, auto-enrolment pensions and the ending of the debt warehouse scheme would spell the end for many businesses.

The issue of high costs for small and medium sized enterprises has been raised repeatedly at meetings of both the Fianna Fáil and Fine Gael parliamentary party in recent weeks.

Approximately 58,000 individual customers were availing of the Debt Warehouse Scheme (DWS) at January 26, 2024, with a balance of €1.72billion outstanding. Almost 70% of those customers have warehoused debt of less than €5,000.

A spokeswoman for the Department said they could not provide a figure for how much the move would cost.

She said: ‘It is not possible to forecast the amounts and timing of debt payments in advance, given that payment arrangements are tailored to the circumstances of individual customers in the warehouse.

‘The amounts of interest already paid are not expected to be significant in the context of the overall scheme.’

Announcing the move yesterday, Mr McGrath said: ‘This 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.

‘Acknowledging this, I have today announced that the interest rate applicable to outstanding warehouse liabilities will be reduced from 3% to 0%.

‘I will be bringing forward the necessary legislation to give effect to this and Revenue has confirmed that it will implement the 0% on an administrative basis in the meantime.

‘Where a business has already paid warehoused debt, which was subject to interest at 3%, it will get a refund of that interest. This will ensure that all taxpayers are treated fairly.’