Posted on: 19 Apr 2022

Warehouse End Date

As the end date for the tax debt warehousing support approaches, it’s an opportune time for businesses who availed of the scheme to get a handle on what taxes have been warehoused and to start planning for how they will deal with the repayment of same when the time comes.

April 30^th 2022 is the official end date of the tax debt warehousing for Irish businesses.

The original cut off date was 31^st December 2021, however businesses impacted by trading restrictions in late 2021/early 2022 (mainly the hospitality sector) were allowed to avail of the warehouse arrangement for an additional 4 months.

Warehouse Facts & Figures

Revenue’s most recently published figures show that over 90,000 individual entities are currently availing of the debt warehousing, with the amount of warehoused tax at 31^st March 2022 standing at close to €3bn, the breakdown of which was shown as follows:

VAT €1,361m

Employers PAYE/PRSI €1,385m

Income Tax €57m

TWSS €55m

EWSS €27m

It is estimated that the hospitality sector could account for > 25% of the total warehoused tax debt.

Repayment of Taxes

Taxpayers who were allowed to avail of the scheme up until 31^st December 2021, are not due to commence repayment of warehoused taxes until 1^st January 2023, with those who were allowed to avail of the scheme until 30^th April 2022, not due to commence repayment of warehoused taxes until 1^st May 2023.

Tax debts are warehoused at 0% interest up until 1^st January 2023 and 1^st May 2023 respectively, after which an annual interest rate of 3% applies , assuming that the taxpayer cannot repay the debt in full and has to enter into a phased payment arrangement with Revenue.

Revenue have yet to give guidance on what repayment terms will be provided to taxpayers who can’t repay their warehoused debts in full on the due dates, which will be the vast majority of those who availed of the scheme. It is expected that broad parameters will apply and specifics will be agreed on a case by case basis and will depend on the repayment capacity demonstrated by each taxpayer.

Plan of Action

With most taxpayers who availed of the debt warehouse scheme a little over 8 months away from having to commence repayments, it is important that businesses start to take action now and give themselves plenty of time to put a plan of action in place.

Immediate actions that should be looked at include the following;

• Quantify the total amount of tax that has been warehoused
• Quantify any other tax liabilities that are due to Revenue and fall outside of the warehouse arrangement (Revenue have been supportive to date and have been slow to issue demands but don’t expect this to continue beyond the short term)
• Quantify all other debts and liabilities that are sitting on your Balance Sheet, some of which may have arisen during the pandemic e.g. additional temporary support from creditors and suppliers
• Prepare Profit & Loss forecasts for the business for the next 5 years using sensitivity analysis where appropriate around areas such as turnover and cost increases
• Prepare Cashflow forecasts for the business for the next 5 years based on the Profit & Loss forecasts and allowing for capital expenditure and repayment of debt (loans, leasing, warehoused debt etc)

The Cashflow forecasts should form the basis of your application to Revenue for a phased warehoused debt repayment plan and hopefully will provide you with the confidence and comfort that your business can make it through this difficult period. It will also provide you with the information to allow you to manage the finances of your business on a day to day basis.

Alarm Bells

Budget 2022 made provision that up to 25% of the warehoused tax debts may never be repaid.

There is also widespread concern that the end of government supports such as the debt warehouse scheme and the employment wage support scheme will result in businesses failing.  Some of these businesses were in financial difficulty prior to the pandemic and the government supports delayed what unfortunately may be an inevitable outcome.

It is important to remember that from 1^st January 2022, current taxes must be paid when they fall due unless you were one of the businesses who were allowed to avail of the extended warehouse arrangement to 30^th April 2022, in which case this goes out to 1^st May 2022.

If your business is struggling to pay current taxes as they fall due then it’s important that you take a look at what’s going on in your business and understand why this is happening. The repayment of warehoused debts will only increase the pressure on the business in the months and years ahead.

Don’t wait until it’s too late. Take action now while you have time to change course.

Paul O'Connell

Managing Partner