Take action ahead of May deadline for warehoused debt, firms are warned

Revenue says it will be ‘flexible’ if businesses engage with it to address payment options

Revenue has written to thousands of business owners, warning them that they have just weeks left to finalise a long-term agreement for the repayment of their Covid-era warehoused debt or risk paying onerous interest rates on the balance.

It has insisted it will be “pragmatic and flexible” in reaching payment resolutions with debtors.

The debt warehousing scheme was introduced in 2020 during the pandemic in an effort to prevent businesses from collapsing during the crisis.

The scheme applied to Vat debts, payments due under PAYE, some self-assessed income tax and overpayments made to businesses under wage support schemes.

Businesses only have until May 1 to engage with the Revenue Commissioners to address their outstanding debt under the scheme. Ideally, they need to engage weeks before the deadline.

They are currently paying no interest on the debt.

Revenue has warned business owners that want to agree a phased payment arrangement, they need to begin the process immediately.

“You should start the application process on the Revenue Online Service well in advance of May 1, 2024 to allow time to mutually agree the optimal payment plan to suit your individual circumstances,” the letter signed by collector general Joseph Howley states.

It adds: “I can assure you that Revenue will be pragmatic and flexible in agreeing payment plans and work with business who meaningfully and proactively engage with us.”

In most cases, phased payments can be agreed without additional supporting documents, meaning they are likely to be processed rapidly by Revenue, once submitted.

However, it notes that where businesses do not engage, warehoused debt will be subject to “immediate collection” after May 1 and “possible enforcement”, with the standard interest rates of between 8pc and 10pc then applying to all debt owed.

“This can be avoided if you engage now and agree a plan to address the warehoused debt before May 1,” the letter states.

In early February, Finance Minister Michael McGrath announced that the planned 3pc interest rate on warehoused debt would be reduced to zero and Revenue undertook to show significant flexibility in arrangements to repay the debt.

The latest numbers show that 56,700 taxpayers have warehoused debt. Of those, 46pc owe less than €500.

And 83pc of the total €1.7bn in the warehouse scheme is owed by just over 5,000 taxpayers.

Taxpayers with less than €500 in the warehouse scheme are not eligible for phased repayment arrangements and must repay the debt in coming weeks. They can offset the debt owned against refunds due to them from Revenue after May 1.

By last November, there was €88m of warehoused debt that had been written off as uncollectible by the Revenue Commissioners.

The warehouse and retail sector had €28.8 in debts that won’t be collected, while the construction sector had €15m.

The debt has been deemed uncollectible due to factors including liquidation, examinership, cessation of trading and bankruptcy.

At the end of September last year, there were 11,816 businesses and individuals with warehoused debts totalling €312m that had their warehouse status revoked due to persistent non-compliance with the scheme’s conditions.

Where non-compliance is properly addressed and current taxes brought up to date, the warehouse status could be reinstated.

‘At end of September last year, there were 11,816 businesses and individuals with warehoused debts of €312m’