Revenue’s deferred tax debts and interest suspension arrangements

Revenue has announced that it won’t charge small businesses interest on late payments of PAYE and VAT. This is part of a range of state supports and liquidity measures to help small businesses with cash flow difficulties through the current crisis.

Revenue has already suspended debt collection and the charging of interest on late payment for the January/February and March/April VAT periods and February, March and April PAYE (Employer) liabilities. These arrangements have now been further extended to include May/June VAT and May and June PAYE (Employer) liabilities.

PAYE (Employer) liabilities include income tax, universal social charge and employees’ and employer’s PRSI due to be remitted by employers to Revenue under the PAYE system in respect of the payment of wages, salary, etc., to their employees.

The suspension will automatically apply to taxes due from companies with an annual turnover of up to €3m. However, larger businesses will have to request the support by contacting the Collector-General's office or by engaging directly with their Large Corporate Division or Medium Enterprise Division branch contacts.

Businesses are still required to file the relevant returns so that Revenue has visibility on the level of unpaid debt arising from the COVID-19 crisis. Where a business is unable to file complete returns due to, for example, the absence of key employees or an agent due to COVID-19 related illness or restrictions, the business should submit returns based on the best estimate of the liability. Any subsequent amendments can be completed on a self-correction basis without penalty.

Under the scheme, Revenue will defer VAT and PAYE (Employer) tax debts while a business is unable to trade or was subject to restricted trading due to the COVID-19 related health restrictions. Revenue will also ringfence tax debt due for a further two months after a business resumes trading.

There will be no collection of any of the debt in question during this period and no interest will apply. Once trading returns to normal, the VAT and PAYE owed will be warehoused for further a year. However, businesses will be expected to pay current liabilities as they arise during this 12-month period.

Once the 12-month period is up, the outstanding debt will incur a 3% interest rate until it is paid back. Normally unpaid VAT and PAYE is charged 10% interest.

The total cost of the deferrals during March and April according to Revenue is more than €1.26bn.

A company’s tax clearance will not be affected if it chooses to use the scheme.

Full details of the arrangements for debt warehousing will be published in legislation in due course.

If you require assistance with any challenges you currently face during this crisis, please contact a member of the tax team or your normal Crowe contact.