Extension of Debt Warehousing Scheme to May 2024

Yesterday, 17 October 2022, Revenue announced a significant update to the Debt Warehousing Scheme (DWS). Under the DWS, taxpayers with deferred liabilities had until the end of 2022 (and for certain qualifying business, 30 April 2023) to either settle their outstanding liabilities (at 0% interest) or to establish a Phased Payment Arrangement with Revenue (at 3% interest). In light of the current challenging economic environment, Revenue have now extended this deadline to 1 May 2024. Revenue will write to all taxpayers in December who have debt warehoused outlining how outstanding liabilities deferred under the DWS may be repaid.

What do I need to do?

Taxpayers should complete a self-review to ensure that all appropriate tax liabilities have been included in the DWS.

Taxpayers who availed of the DWS also need to engage with Revenue in advance of the new deadline of 1 May 2024 to:

  1. Settle all outstanding liabilities by end of 2022 (at 0% interest);
  2. Settle all outstanding liabilities between 1 January 2023 – 30 April 2024 (at 3% interest); or
  3. Establish a Phased Payment Arrangement (PPA) to settle the outstanding liabilities within such period as may be agreed with Revenue after the 1 May 2024 deadline (at 3% interest).  A PPA generally requires a minimum down payment of 25% or 40% of the outstanding liabilities.

Other Relevant Legal Considerations

When considering how to deal with outstanding liabilities which have been deferred under the DWS, taxpayers should be mindful of their obligations to other creditors either from an insolvency law perspective or under existing credit facilities. In particular, before engaging with Revenue taxpayers should consider some of the following insolvency and banking related issues:

  1. Analysis of current financial position – Is the company solvent and able to discharge its liabilities as and when they fall due? It may be necessary to re-negotiate credit and payment terms with other creditors in order to facilitate a settlement with Revenue and to allow the company continue trading as a going-concern into the future;
  2. Breach of loan arrangements - Standard banking documentation will often impose positive obligations on a borrower to pay its taxes. A borrower who deferred its tax liabilities under the DWS may not technically be compliant with such obligations (depending on how the relevant credit agreement is drafted), but failure to repay those outstanding liabilities (or agree a PPA with Revenue within the timeframe) would certainly breach such an obligation. The consequences of a breach will vary but will typically entitle a lender to declare a default and call in its loan.
  3. Directors Duties – Directors of a company in financial distress need to consider the interests of the company creditors as a whole and the future prospects of the company being able to continue as a going-concern before agreeing to settle the outstanding tax liabilities with Revenue. If the company is subsequently placed into liquidation and it is deemed by a liquidator that those payments ought not to have been paid, the directors may face certain personal liability consequences and the payments to Revenue are at risk of being clawed back;
  4. Restructuring Options – If you do not have the means to enter into an acceptable arrangement with Revenue, there are formal restructuring options that can potentially be availed of. Those options are the Small Company Administrative Rescue Process (for small and medium sized companies) or Examinership;

How can we help?

Our Tax Group have significant experience in assisting clients regularise their tax position, managing dealings with Revenue, and in putting in place with Revenue PPAs for the repayment of deferred tax liabilities. 

If you are concerned that you may be in breach of your banking terms, our Banking Group can review the relevant underlying documentation to ascertain the position. If required, we can also assist with formulating a remediation strategy and managing communications with your lender.

Our Insolvency and Restructuring Group can assist with any queries you may have on potential formal restructuring options.

This document has been prepared by McCann FitzGerald LLP for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.