The Revenue Commissioners has urged businesses with Covid-era warehoused tax debt to plan and engage with authorities on repayment schedules ahead of a key deadline in May as the total amount that continues to be owed stands at almost €1.79 billion.
“In advance of May 1st, 2024, Revenue’s advice to businesses is to start planning for the repayment of warehoused debt and, where required, agree a payment arrangement now with the collector generals division using the online PPA (phased payment arrangements) facility,” a spokesman for Revenue said.
“Early engagement will allow time to agree the best repayment solution appropriate to the business and provide certainty with regard to future cash flow commitments. Flexible payment arrangements can be activated now with a reduced down payment and monthly repayments commencing in May 2024, and if circumstances change in the interim payment schedules can be adjusted.”
The pressure of looming repayments is expected to contribute to an uptick in corporate insolvencies next year as the effects of heightened interest rates, rising labour costs and economic uncertainty cloud the horizon, according to insolvency experts.
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The tax warehousing scheme, together with a lax approach that creditors had taken to debt recovery, had contributed to relatively subdued insolvency activity since the outset of the pandemic in 2020.
Some 499 insolvencies were reported in the first three-quarters of the year, according to Interpath Advisory (Ireland). While that marked a sharp rise of more than 50 per cent from the same period in 2022, the level was broadly in line with the average number of failures for the same nine months of 2018 and 2019, before the pandemic.
The warehoused tax deadline “will be the big [Irish corporate] story of 2024”, said Mark Woodcock, a partner and head of corporate restructuring at law firm Fieldfisher’s Irish practice and chairman of Restructuring & Insolvency Ireland.
“It is foolhardy to ignore the likely implications of this. Companies with warehoused debt should be negotiating with the Revenue right now so that they have agreement and repayment plans in place [during the first quarter of] 2024. The Revenue Commissioners have a finite amount of personnel and it will not be possible to deal with everyone at once.”
Revenue is currently charging interest at an annual rate of 3 per cent on warehoused taxes, though this is well below the normal rate on overdue taxes of 8-10 per cent.
Businesses have already begun to repay their warehoused debt where their financial circumstances permit, and this is evident in the reducing warehouse balance, according to the Revenue spokesman. At the end of November there was almost €1.79 billion in the warehouse for 58,152 businesses, compared to €2.48 billion warehoused for 72,000 businesses at the end of 2022.
Two-thirds of the businesses owe less than €5,000, the spokesman said.
As of end November a total of €90 million of debt previously warehoused by 831 businesses has been determined as uncollectable due to liquidation, the Revenue spokesman said. These businesses have exited the debt warehouse as a result.
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