Interest rate change to the Revenue Tax Debt Warehouse Scheme

In response to the business challenges arising as result of the COVID-19 crisis, the Irish Government, in 2020, legislated to allow for specific tax debts associated with the COVID-19 crisis to be deferred or ‘warehoused’.

The specific scheme allowed for VAT and PAYE (Employers taxes) arising from the COVID-19 crisis to be deferred and not repayable until ultimately the 1 May 2024. At the time of the legislation being introduced and other subsequent changes, it was provided that such debt would be repayable subject to a 3% rate of simple interest.

What has changed?

On the 5 February 2024, in a welcome move to support SME businesses, it was announced by the Minister for Finance, Michael McGrath T.D, that the interest rate applicable to the warehoused debt would be reduced from 3% to 0%. It was confirmed that the necessary legislation to implement this reduction will be introduced at the next available opportunity.

It has been confirmed by the Irish tax authorities that it will operate the 0% rate on an administrative basis, pending the legislative change. It was also confirmed by Revenue that where a business has already paid warehoused debt, which was subject to interest at 3%, that interest will be refunded.

Practical matters for businesses to consider

It remains a key condition of the Debt Warehouse Scheme that businesses continue to file their current tax returns and pay current liabilities as they fall due. By remaining in the warehouse, businesses will be benefiting from the 0% interest rate and flexible payment options available in respect of warehoused debt.

If these conditions are not met, the consequence includes the revocation of the warehouse facility, which will result in the standard interest rate of 10% applying, backdated to when the debt arose, and the immediate enforcement of all outstanding debt, including interest.