Christopher O'Sullivan (Cork South West, Fianna Fail)
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304. To ask the Minister for Finance if he will adopt a standard position on a moratorium for loan repayments for the hospitality sector to reflect the extended Covid-19 restrictions; and if he will make a statement on the matter. [13421/21]

Paschal Donohoe (Dublin Central, Fine Gael)
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As the Deputy will be aware, on 18 March 2020, the Banking and Payments Federation of Ireland (BPFI) announced a coordinated approach by banks and other lenders to help their customers, including those in the hospitality sector, who were economically impacted by the Covid-19 crisis. The measures included flexible loan repayment arrangements where needed, including loan payment breaks initially for a period up to three months and then subsequently extended for up to six months. The implementation of this voluntary moratorium by the banking industry was a flexible response to the emerging Covid-19 crisis and ensured that a large volume of affected customers could benefit quickly during a fast moving and evolving public health crisis.

Borrowers whose payment break has ended are been given an option to return to full repayments based on the same term of the loan or to extend the term of the loan or to engage further with their bank on suitable arrangements. The BPFI reported, that as of 31 December 2020, approximately 49% of SMEs returned to repaying on the existing term whilst 46% returned to repaying on extended term basis and just over 5% were receiving other supports from lenders.

As Minister for Finance I have no function in the commercial decisions made by banks. However, the Central Bank has confirmed that there is no regulatory impediment to lenders offering payment breaks to borrowers, providing they are appropriate for the individual borrower circumstance. The BPFI has also reiterated that standard payment breaks continue to be part of the wide range of tailored solutions which are being made available to customers upon assessment of their situation.

SME borrowers have regulatory protections via the Central Bank's SME lending regulations. The SME Regulations set out the required treatment of SMEs by regulated entities in relation to various aspects of business lending. This includes detailed provisions around the credit application process, requirements regarding security or collateral, credit refusals and withdrawals, handling complaints, managing arrears and having in place policies for engaging with SMEs in financial difficulty. The options could include additional flexibility, and this could be a short-term arrangement such as additional periods without payments or interest-only repayments, or if appropriate more long term arrangements. The Central Bank recently wrote to all lenders indicating that lenders are to ensure that they have sufficient expert resources to assess individual borrower circumstances, and to offer appropriate and sustainable solutions to affected borrowers in a timely manner in line with regulatory requirements. The Central Bank’s clear expectation is that lenders engage effectively and sympathetically with distressed borrowers.

In addition, Credit Review was established to assist those SMEs and farm borrowers that have had credit applications of up to €3 million refused or indeed an existing credit facility withdrawn or amended by the participating bank. SMEs can apply to Credit Review after exhausting the internal appeals process in the participating institution, which are currently AIB, BOI, Ulster Bank and Permanent TSB.

I will continue to work with the Central Bank, as regulator, to ensure that the Central Bank consumer protection and other applicable frameworks will be fully available to all borrowers that will still need support.

Christopher O'Sullivan (Cork South West, Fianna Fail)
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306. To ask the Minister for Finance if he will consider extending the current tax warehoused at 0% from 12 months to an additional 48 months given that some businesses have remained closed throughout the Covid-19 pandemic; and if he will make a statement on the matter. [13433/21]

Paschal Donohoe (Dublin Central, Fine Gael)
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I am advised by Revenue that the current tax warehousing schemes allow for the deferral of collection of certain tax liabilities relating to “Period 1”, the “Covid-19 restricted trading period”. The tax liabilities that may be deferred or “warehoused” are VAT, PAYE (Employer) liabilities, excess Temporary Wage Subsidy Scheme (TWSS) payments due to be refunded to Revenue by employers, and certain self-assessed income tax liabilities.

In the case of VAT, PAYE (Employer) and excess TWSS liabilities, Period 1 refers to the period when a business has been unable to trade due to the Covid-19 related restrictions and includes the first full two monthly VAT period after the business resumes trading. For example, if a business has been closed due to Covid-19 restrictions but resumes trading in April 2021, it will be able to warehouse liabilities accrued from March 2020 up to the end of June 2021.

Revenue has confirmed that where a business re-opened but has had to close again due to the re-imposition of restrictions, the trade is deemed to be still subject to the restrictions provided for in the regulations under sections 5 and 31A Health Act 1947 until it has re-opened again. This means that VAT, PAYE (Employer) and excess TWSS liabilities for such businesses can continue to be warehoused in respect of the extended restricted period.

Following the expiration of Period 1, businesses are afforded a further 12 months (“Period 2”) during which collection of warehoused liabilities will be deferred.

No interest will be charged on outstanding Covid-19 liabilities in either Period 1 or Period 2. In cases where businesses have been subject to re-imposition of restrictions intermittently since March 2020, the earliest liabilities warehoused (Jan/Feb VAT and Feb PAYE) have already been warehoused at 0% interest for almost 12 months. Where such businesses do not resume trading until April 2021, these liabilities may be warehoused at 0% interest for a period of 28 months in total (from March 2020 until June 2022). Interest on warehoused liabilities is charged thereafter at c. 3% per annum until the liabilities are paid in full (this is “Period 3” of the warehousing scheme).

Legislation underpinning the warehousing of VAT, PAYE (Employer) liabilities and overpayments of TWSS provides that Period 2 may be extended by Ministerial order but cannot extend beyond 31 December 2022. This is to ensure compliance with EU State Aid rules, provided for under the EU Temporary Framework for State Aid measures to support the economy in the current COVID-19 outbreak.

The Government will continue to assess the effects of the Covid-19 pandemic on the economy and I will continue to work with Ministerial colleagues to ensure that appropriate supports are in place to mitigate these effects.