Covid debt deadline to push pubs to the brink
Call to extend scheme of debt warehousing as businesses owe €280m to Revenue
THE Government has been urged to extend the Debt Warehousing Scheme as new figures show more than 5,500 pubs, restaurants and other hospitality businesses still owe €280m in tax.
The scheme was introduced during the Covid pandemic to allow businesses to park their tax debt for a time – first at 0% interest, and later at a reduced rate of 3%.
After being extended from October 2022, the scheme is now due to expire on May 1 next year. Businesses will then have to pay a 20% deposit on their debt and have a repayment plan in place. They can still avail of the 3% interest rate, rather than the standard 10%.
But industry leaders warn this will trigger even more restaurant and pub closures, in a sector that is already grappling with a range of increasing costs.
Restaurants Association of Ireland (RAI) chief executive Adrian Cummins said the scheme’s
This will be the trigger for liquidation’
expiration next year is ‘the big elephant in the room, economically, for our industry’.
He told the Irish Mail on Sunday: ‘They’re looking for a 20% deposit upfront, and we believe that should be scrapped. The repayment should be over a maximum of 10 years as opposed to being paid back on a short-term basis.’
In response to queries from the MoS, Revenue confirmed that businesses in the hospitality sector which were allowed to warehouse debt during the pandemic owed €280m to the taxman as of the end of October.
Data for the end of September shows hospitality was second only to the wholesale and retail trade in terms of warehoused tax debt.
Wholesale and retail trade owed €392m at the end of September across 8,910
businesses (21% of total warehoused debt), compared to €299m for hospitality (16%).
This is followed by the construction sector, which has a combined tax debt of €231m (12%) owed by 9,419 companies. However, Mr Cummins said smaller hospitality business that do not have access to cash are particularly vulnerable. ‘[Restaurants] don’t have the cash,’ Mr Cummins added. ‘And I think that’ll be the trigger for liquidation. If a business is being told by Revenue, “you must pay this back immediately”, then I think they’ll liquidate.’
He said he is aware of 140 hospitality businesses that liquidated in July, August and September alone and called for ‘an emergency package of measures that is bespoke to our sector’. Vintners Federation
of Ireland (VFI) chief Pat Crotty said it is no surprise so many hospitality businesses are in debt given that they were closed the longest during the pandemic.
He told the MoS: ‘If you take the Revenue figure, that’s an average of 50 grand [of debt] per premises. In that you will have some people who owe very little and you’ll have some people who will owe a lot. I do know some businesses that could have owed anywhere between a quarter and a half a million.
‘If you own a restaurant or a bar that has a significant number of staff, and who weren’t paying the VAT, paying the PAYE, paying the PRSI for a protracted period through 2020 and 2021, and indeed it extended into 2022 as well, there’d be a sizable issue there to be dealt with,’ he said.
Mr Crotty pointed to other problems ahead for the hospitality sector, on top of continued inflated running costs and the VAT rate for hospitality having returned to its pre-pandemic rate of 13.5% on September 1.
The ‘most obvious one’, he said, is the cost of paying staff – the minimum wage is set to rise by 12% on January 1, which he says will ‘create a tsunami’ as other staff will ‘not unreasonably’ expect their wages to go up too. Auto-enrolment in pension schemes, set to come in during the second half of 2024, will present another ‘headache’, as will incremental PRSI increases over the next five years – signed off on two weeks ago.
Additionally, there is ‘no appetite among the banking fraternity’ for lending money to pubs at the
moment, Mr Crotty said, while more long-term plans to increase sick leave will affect hospitality disproportionately too.
‘We all balk at the prices that are charged in Temple Bar,’ Mr Crotty said. ‘But all these costs have to be absorbed and you have to arrive at a price to sell at to still make a profit at the end of it. It won’t be too long before the price of pints everywhere could be the same as in Temple Bar.’
Revenue confirmed that 94% of eligible debt across all sectors had been paid off by the end of October through the warehousing scheme, ‘leaving a balance of €1.833bn in the warehouse for 57,634 individual entities’.
A spokesman added: ‘Of this, 34% had warehoused debts of less than €100, 15% had warehoused debts between €101 and €1,000, and a further 18% had warehoused debts between €1,001 and €5,000.’
‘Price of pints could be the same as in Temple Bar’