The debt warehousing scheme was introduced in 2020 during the COVID-19 pandemic to aid struggling businesses. This included companies experiencing a decrease in turnover or volume of orders. The scheme allowed businesses to defer some of their tax liabilities until they were able to pay them. Recently, the Minister for Finance announced a pivotal adjustment – the interest rate on warehoused tax debt has been reduced to 0%. Since then, Revenue has updated its terms on the Debt Warehousing Scheme. As a leading accountancy firm, Cronin and Company is dedicated to providing businesses with expert guidance on navigating these changes.
This adjustment comes at a critical time, particularly with a surge in restaurant closures in recent months, as owners grapple with unprecedented challenges. The Tax Debt Warehousing Scheme, designed to alleviate cash flow issues, saw considerable uptake, with over €1.72 billion owed by under 57,500 businesses benefiting from the scheme.
Revenue has assured that businesses who previously settled warehoused debt, initially subjected to a 3% interest rate, will be refunded for that interest. Furthermore, there are now more flexible payment alternatives for warehoused debt. Businesses may also consider extending payment terms beyond the typical three to five years on a case-by-case basis, with the potential for waiving an initial down payment.
The warehousing debt scheme was instrumental in assisting businesses facing cash flow and trading challenges during the pandemic. Under this scheme, eligible businesses were able to defer paying certain tax liabilities until they were financially capable of addressing the debt. The interest rates applied to warehoused tax debt are as follows:
- 0% during period 1 and period 2
- 3% from the start of period 3 to the repayment date.
Effective from the 5th of February 2024, the 3% interest rate applicable from the start of period 3 has been reduced to 0%, marking a significant relief for businesses navigating financial uncertainties.
Risk of Losing Warehouse Benefits
Keeping up with current tax filings and payments is essential to stay in the Debt Warehousing Scheme. Failure to do so may lead to losing Warehouse benefits. In such cases:
- Previous warehoused periods become immediately payable.
- Debt collection actions may be taken.
- Interest charges of 8% to 10% per annum may apply.
- Your Tax Clearance Certificate (TCC) will be rescinded automatically.
- Government support payments or grant aid may stop until compliance issues are resolved.
It is vital to fulfil tax obligations promptly to avoid these consequences and maintain financial stability.
For businesses enrolled in the debt warehousing scheme, it is crucial to stay updated on the latest developments and ensure compliance with ongoing tax obligations. As businesses adapt to evolving economic landscapes, maintaining financial resilience remains paramount. If you require guidance or business advisory services tailored to your business needs, don’t hesitate to reach out to our experts at Cronin and Co. today.