The Office of the Revenue Commissioners has adopted a policy of not charging interest on 2020 VAT and PAYE liabilities incurred but not paid by the self-employed and businesses impacted by Covid-19.
Revenue have also suspended collection enforcement activities related to these monies.
The Government announced a plan in early May to provide working capital support for businesses through the ‘warehousing of taxes’. How this initiative will operate is not yet certain. However, businesses that have been paying – and continue to pay - VAT and PAYE liabilities when due may not be able to avail of this major business support initiative.
Self-employed solicitors should seek professional advice about this matter from their accountant or tax advisor. Quite simply, it looks like businesses may be able to hold on to taxes that they have not paid - and use this money as working capital for 12 months and beyond. However, there is no mention of refunding taxes that have been paid when due and of letting businesses involved use refunded money for 12 months.
Relevant period
The plan for this 12-month warehousing initiative is that it will cover VAT and PAYE liabilities from the end of March until two months after the business resumes ‘normal trading’. There will be no effort made to collect any of the debt involved during this period and no interest will apply.
If firms want to avail of the tax warehousing scheme, they will need to first quantify their tax debt by filing all relevant returns. Revenue have also made it clear that businesses will be expected to pay current liabilities that arise during the 12-month period: summer 2020 through to summer 2021.
Lower interest charge
When the 12-month period is up, any outstanding debt will incur a 3% per annum interest charge. This is a significant further concession, given that Revenue normally charges 10% on unpaid VAT and PAYE. A business’s tax clearance will not be impacted if the business avails of the scheme.
Information on this initiative is contained in a briefing published by the Law Society:
See also:
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This article orginally appeared in the May 2020 member eZine. For more information, and to subscribe, visit eNewsletters.