Gerald Nash (Louth, Labour)
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75. To ask the Minister for Finance if he is concerned that just €73 million of the more than €2.2 billion in warehoused tax debt under the relevant Covid scheme, which is owed by companies, has been paid as of March 2023; the steps he plans to take to address this issue, which now involves approximately 64,000 firms; and if he will make a statement on the matter. [21439/23]

Michael McGrath (Cork South Central, Fianna Fail)
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The Debt Warehousing scheme allows for the deferral of the payment of VAT, PAYE (Employer) and certain self-assessed income tax liabilities, including TWSS and EWSS overpayments. It provided a vital liquidity support to businesses during the Covid pandemic and continues to support businesses as they recover from the impacts of the pandemic and the current energy crisis.

At the end of March 2023, the value of debt warehoused was €2.216 billion for 63,600 businesses. Of this total, 19,758 (31%) have warehoused debts of less than €100; 9,767 (15%) have warehoused debts between €101 and €1,000; and a further 11,769 (19%) have warehoused debts between €1,001 and €5,000. In total 41,294 businesses in the warehouse (65% of the total) have an outstanding balance of less than €5,000.

The bulk of the debt figure is warehoused by just 6,462 customers, with outstanding balances greater than €50,000, totalling €1.897 billion.

In October 2022, Revenue announced an extension to the period during which debts can remain “parked” in the warehouse. This means that businesses do not have the challenge of making arrangements to repay their warehoused debt until 1 May 2024. This significant additional time should greatly support businesses in their recovery from the impacts of the pandemic and the energy crisis and prevent business failure. Importantly also, 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 not unexpected that only a small amount of warehoused debt has been paid to date as there is no obligation on businesses to commence repaying their warehoused debt until 1 May 2024, however to reduce their interest bill, some businesses have already begun to repay their warehoused debt where their financial circumstances permit. To end March 2023, just over 2,000 customers have agreed formal payment arrangements with Revenue for warehoused debt of €73 million, and a further 2,100 customers have paid almost €11 million towards their warehoused debt since January 2023. Revenue’s expectation is that this trend will continue to increase for the remainder of the year as businesses proactively make plans to address the payment of their warehoused debt and reduce their interest costs.

With regard to the repayment of warehoused debt from 1 May 2024, Revenue’s approach to collecting the tax debt remaining in the warehouse at that time will be flexible and tailored to each business based on its capacity to pay. In advance of the repayment date, Revenue will engage with those businesses yet to agree a payment plan, to discuss their payment options and, where required, agree a tailored phased payment arrangement in respect of the ‘parked’ liability, over an agreed timeframe.

Revenue has a proven track record in agreeing flexible payment arrangements that take account of the financial circumstances of each business and their capacity to pay. These flexibilities can include a reduced down payment amount to commence the payment arrangement, an extended payment duration of up to 5 years and the availability of payment breaks and payment deferral when temporary cash flow difficulties arise during the arrangement term.

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 payment difficulties and will satisfactorily address the repayment of their warehoused tax debt over an acceptable period of time.

Businesses are reminded that it remains 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. 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.