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New scheme to Warehouse VAT and PAYE (Employer) tax debts associated with the COVID-19 crisis

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New scheme to Warehouse VAT and PAYE (Employer) tax debts associated with the COVID-19 crisis

New scheme to Warehouse VAT and PAYE (Employer) tax debts associated with the COVID-19 crisis

There is a “warehousing” scheme in place for VAT and PAYE/PRSI/USC (“PREM”) liabilities. This means that, while taxpayers will still have to submit tax returns as normal, no actual payments need to be made if the taxpayer wishes. A summary of the most important points are listed below.

 

Who does it apply to?
The warehousing scheme is available to “SME’s” (i.e., Turnover < €3m p.a.) who are not dealt with the either Large Cases Division or Medium Enterprises Division (LCD/MED) within Revenue.

 

How do I apply?
Revenue will “operate the scheme on an administrative basis”. Our reading of this is that the SME does not need to apply for the warehousing scheme. It simply submits the returns. Of course, it would do no harm to send a quick note to Revenue via MyEnquiries. (Incidentally, LCD/MED clients who wish to avail of a similar arrangement should contact Revenue via MyEnquiries).
What if I cannot accurately calculate my VAT/PREM liabilities?
Your best estimate will suffice. This concession is available primarily in case the bookkeeper / accountant is not available for work. It should not be used widely.

 

What taxes/returns are covered?

  • Initially, Revenue announced that VAT from Jan/Feb 2020 – May/June 2020 and PAYE/PRSI/USC (“PREM”) from Feb 2020 – June 2020 would be covered
  • Revenue then announced that legislation would be forthcoming and that the scheme would be extended. The arrangements have 3 separate Periods

 

What is Period 1? 

  • This is the period within which the SME need not pay their VAT/PREM liabilities
  • It is described as the “Covid-19 restricted trading period”
  • Essentially this is the period during which the business was closed or subject to restricted trading, under the Government Roadmap. As we know, for example, Restaurants will be reopening on 29 June 2020, while Hairdressers could be a different date
  • For all businesses, an additional 2 months grace is given. Therefore, Period 1 for Restaurants will be up to 29 August 2020

 

How are my VAT/PREM liabilities dealt with in Period 1?

  • Returns must be submitted as normal
  • No collection of tax liabilities by Revenue
  • No interest will be charged
  • If “best estimates” have been used, these returns must be finalised by the end of Period 1

 

What is Period 2 and how are my VAT/PREM liabilities dealt with in Period 2?

  • Period 2 is for a further 12 months from the end of Period 1
  • No interest will be charged during Period 2 on tax liabilities arising in Period 1
  • Tax returns for Period 2 must be both submitted and paid

 

What is Period 3 and how are my VAT/PREM liabilities dealt with in Period 3?

  • Period 3 “will last … until the Covid-19 related debts [i.e., Period 1] are paid”. There is no further guidance for the moment on how long Period 3 will last
  • An interest rate of 3% will be applied to Period 1 debts
  • Period 2 and Period 3 returns must be both submitted and paid

 

When will we get further info?
The legislation will be presented to the Oireachtas in due course, at which time we will get further details. It is unclear, for example:

  • Will the warehousing benefits be withdrawn where a business is unable to pay liabilities arising in Period 2/3?
  • We can only presume that Instalment Arrangements will continue to be available for Period 2/3 liabilities
  • How much time will be given to pay a business’s Period 1 liabilities?

For taxpayers who file annual returns and pay liabilities by Direct Debit, the same principles as per above should apply.

 

Other points 

  • Tax clearance will not be affected if availing of these arrangements
  • Refunds arising will be paid, even though there are liabilities outstanding for other taxes/periods (unless the client chooses otherwise)

Further information on the New ‘warehousing’ of deferred tax debts and interest suspension arrangements is available on the Revenue website.

If you wish to discuss further, please contact either Francis Moriarty or your usual PSC contact.

On behalf of the entire team here in PSC, we wish you and yours good health and Stay Safe.