Donnchadh Ó Laoghaire (Cork South Central, Sinn Fein)
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193. To ask the Minister for Finance if a write-off is available to businesses struggling to repay VAT debt built up through debt warehousing during the Covid-19 pandemic. [7098/23]

Michael McGrath (Cork South Central, Fianna Fail)
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During the COVID-19 pandemic, Revenue strongly supported businesses by suspending normal debt collection activities and implementing the Debt Warehouse Scheme to provide businesses with vital liquidity support. I am advised by Revenue that over 66,000 individual customers are currently availing of the Debt Warehousing facility with €2.338 billion warehoused, of which €1.120 billion is VAT debt.

In October 2022, Revenue announced an important and significant extension to the Debt Warehousing scheme in light of the challenging economic situation that businesses continue to face. Under the scheme, most businesses with warehoused debt were due to enter into an arrangement with Revenue to commence repaying that debt by the end of 2022. This timeline has been extended to 1 May 2024. This means that businesses no longer have the challenge of making arrangements to repay their warehoused debt until 1 May 2024 and this significant additional time should greatly support businesses and prevent business failure.

It is also important to note, businesses are still able to avail of the reduced 3% interest rate from 1 January 2023, as opposed to the general interest rate of 10% when they come to pay the debt.

It is a key condition of the Debt Warehousing Scheme that current liabilities are filed and paid on time. Revenue is actively engaging with businesses in the scheme to ensure they are complying with this key condition in order to retain the benefits of the scheme. However, where there is persistent non-compliance with current tax obligations, businesses will lose the benefit of the scheme and their debt warehouse status will be revoked. Where this happens, all warehoused debts become payable immediately and will no longer have the benefit of the interest free period of 0% up to 31 December 2022 and the 3% rate from 1 January 2023. If the debt remains unpaid, it will be subject to enforcement action with an interest rate of 10% applied.

Where payment difficulties arise, particularly in relation to current tax obligations, I am assured that Revenue will work proactively with businesses who engage early to resolve these payment difficulties. Revenue has a proven track record in agreeing flexible Phased Payment Arrangements to allow for the repayment of debt over a period of time.

A write-off of warehoused debt is not being considered as this would be unfair to those businesses who continued to pay their tax liabilities during the Covid-19 pandemic and did not avail of the warehousing scheme. Over 250,000 customers were eligible for the scheme with declared debt eligible to be warehoused of €31 billion. More than 92% of these eligible taxes have been paid to date with the balance of €2.338 billion warehoused at end January 2023. To date, almost 2,000 warehoused customers have voluntarily agreed payment arrangements for warehoused debt of €72m. Furthermore, in the case of VAT and PAYE (Employer) liabilities, both are fiduciary taxes collected by the employer or accountable person. Similarly, TWSS and EWSS are payments which employers received on behalf of their employees.

Revenue’s expectation is that the extended timeline to 1 May 2024 for entering into arrangements for repaying warehoused debt, together with flexible payment arrangements, will assist most businesses to work through any difficulties and will satisfactorily address the repayment of their tax debt, including any warehoused debt, over an acceptable period of time.