Mr. Paddy Purtill:

I thank the Cathaoirleach for the opportunity to make my opening statement. I understand that this meeting is to discuss the small companies administrative rescue process, or SCARP as it is more commonly known. I welcome the opportunity to discuss the process from a Revenue perspective as a creditor and tax administration.

Revenue has well-developed and long-established procedures in place to deal with companies which do not, or cannot, meet their tax liabilities. These procedures include assigning designated caseworkers to individual cases with tax debt and applying escalatory interventions where necessary to ensure compliance. These interventions include putting in place phased payment arrangements, charging interest on late payment and, where necessary, debt recovery through enforcement. The application of the various strategies is deployed depending on the level of engagement by the taxpayer and the level of tax debt at risk.

While Revenue must be mindful of its core function to serve the community by fairly and efficiently collecting taxes and duties, it is committed to being a constructive participant in SCARP and has shown the maximum amount of flexibility possible when considering applications under the scheme. This is reflected in the strong opt-in rate to the scheme in relation to Revenue debt.

To ensure clear and streamlined engagement between Revenue and key stakeholders operating in the SCARP environment, a dedicated team in Revenue's Collector General's division acts as the first point of contact for all SCARP-related queries. Contact details and initial requirements for Revenue debt to be included in the process are outlined on a designated SCARP information hub on the Revenue website.

Revenue debt is classed as excludable debt under section 558L(4) of the Companies (Rescue Process for Small and Micro Companies) Act 2021. This means that Revenue may opt out of an arrangement on the following grounds: that the eligible company has failed, at any time, to comply with a requirement relating to tax imposed, examples of which include outstanding returns or a poor tax compliance history; there is an open Revenue audit or intervention into the eligible company; or the eligible company is party to an appeal in respect of a requirement relating to tax.

As part of SCARP, a company is required to appoint a process adviser. The process adviser is then obliged to work with the company's creditors to formulate a rescue plan that can work for both the company and its creditors. Revenue encourages process advisers to engage as early as possible during the preparatory stage of the process and visit the designated area on Revenue's website. Such engagement will assist in clarifying Revenue's requirements and help increase the possibility of Revenue consenting to the inclusion of its debt in the process.

While some of the information required is straightforward, for example, that all tax returns are up-to-date and appropriate consents and a statement of affairs are submitted, further supporting documentation may be requested on a case-by-case basis.

It is important to note that where there is failure by the process adviser to provide the required level of information and the company is non-compliant with its tax obligations, Revenue will have no option but to opt out of the arrangement.

It is also important that the process adviser consider all tax implications when entering SCARP. These include: that the company files and pays its current taxes as they fall due following the commencement of the SCARP arrangement, as failure to file and pay current taxes is a clear indication that the company does not have a reasonable prospect of survival; that Revenue will recoup any VAT input credit that has been claimed on expenditure that has not been honoured, as covered by section 62A of the Value-Added Tax Consolidation Act 2010; that company directors may become personally liable for their own unpaid PAYE and PRSI, as per section 997A of the Taxes Consolidation Act 1997; and that there is a need to account for exceptional income gains arising through the write-off of amounts owing to creditors. If the company fails to file returns and make the necessary payments in respect of current taxes, Revenue will notify the process adviser. If the non-compliance is not addressed in a timely manner, Revenue may apply to the court to challenge the continuation of the process or to place the company into liquidation or receivership.

Since the introduction of SCARP, Revenue has worked with the insolvency practitioners to best achieve positive outcomes for all involved. This has included a presentation to Restructuring and Insolvency Ireland members, a webinar to Irish Tax Institute members and the publication of clear guidance on Revenue requirements in respect of SCARP on its website.

There have been 62 SCARP applications to date. In the main, these have been made by taxpayers in the hospitality, retail and construction sectors. Of those, 60 have been reviewed with two opt-in decisions pending. Of the 60 cases reviewed, three had no Revenue debt. Of the remainder, Revenue opted in to 48 cases and opted out of nine, giving an opt-in rate of 84%. The key reason for opting out of the nine cases was a significant history of non-compliance with tax obligations. Where rescue plans have been finalised, Revenue has agreed dividends of approximately €5.3 million from a total tax debt of €21.5 million. Revenue will continue its process of reviewing and monitoring all applications on a case-by-case basis and being a constructive participant in SCARP.

To conclude, I draw the committee’s attention to section 851A of the Taxes Consolidation Act 1997 and my obligation to uphold taxpayer confidentiality. Subject to this constraint, I am happy to answer members' questions.