Debt warehousing – Irish businesses must act before May 1st deadline
As May 1st approaches, the Minister for Finance has urged businesses to engage with Revenue, stating there will be no further extensions.
The changes being confirmed today include:
- The interest on the warehoused tax is being reduced to 0% (any business that paid interest already on warehoused tax will have it repaid).
- The Revenue will adopt enhanced flexibilities including extending the repayment term beyond the standard 3-5 years on a case-by-case basis.
- The Revenue will work with individual businesses who encounter cashflow difficulties and will show as much flexibility as possible.
These changes and enhanced flexibilities are conditional on businesses engaging with the Revenue, entering into a phased payment arrangement by 1 May 2024, filing their current returns on time, and staying up to date on current tax liabilities.”
The full annoucement is on the Gov.ie website here.
How the Tax Debt Warehousing scheme worked
The Tax Debt Warehousing scheme provided vital support to businesses during the pandemic and cost-of-living difficulties by assisting businesses with cash-flow during these difficult trading periods, preventing many business failures.
Revenue confirmed that, as of 26 January 2024, €1.72 billion was warehoused for 57,435 customers. 70% was for amounts less than €5,000 and 5,265 have outstanding balances greater than €50,000.
The necessary legislation to implement the 0% interest will be introduced at the next opportunity. Businesses should engage with Revenue as soon as possible to discuss their circumstances and agree arrangements.
The next steps for Irish businesses
These announcements are a breakthrough for SME survival, says Paul O’Donovan, but businesses need to be in negotiation with Revenue now to understand what payment structures they can achieve. This means smoother ride for cash flow and budgeting, versus Revenue putting them under pressure for repayments.
“Businesses that put their head in the sand could find that they’re not able to meet their current liabilities because of their debt warehouse liability. That in turn causes their debt warehouse liability to arrangement to be ceased, and they then get called on the full payment immediately.
There’s a bit of a chicken and egg scenario – payments have to be kept up-to-date in order to avail of whatever arrangement with Revenue regarding the payment of the arrears.”
While the focus is on businesses with debt warehoused, all Irish businesses would benefit from a review of their 2024 budgets, he advised. Cash flow management has been particularly challenging in early 2024 for many Irish organisations.
“Bi-monthly, if not monthly, management accounts” to pinpoint issues
“Most businesses would have set their 2024 budgets in October and a lot has changed. So is the time to review Q1 numbers against those budgets and make adjustments accordingly, so they have a clear picture of where they’re at now.”
“I suggest then businesses would certainly need to be doing – at a minimum – bi-monthly, if not monthly management accounts, to compare what they’ve budgeted with what’s actually happening.”
“Effectively, if there are issues, this means they’re pinpointing it as early as possible and that that they’re getting the right advice implemented as fast as possible.”
Understanding your options and next steps
Every business has unique circumstances, cashflow and needs. Paul recommends talking to someone who understands both your business and the complexities of Revenue and other supports available. Contact your own accountant or reach out to our specialist team for a free and confidential discussion.
