Ireland: Statistical Report on the Revenue Debt Warehousing Scheme Published

Why should I read this?

Revenue’s Debt Warehousing Scheme (the Scheme), introduced in May 2020 to support businesses coping with the impact of the COVID-19 pandemic, has played a crucial role in ensuring the viability of thousands of businesses. The high level of engagement with Revenue and the significant reduction in warehoused debt has demonstrated the effectiveness of the Scheme.

On 5 June 2024, Revenue published a detailed statistical report on Scheme (the Report). The Report provides an overview of the Scheme’s outcomes as of 3 June 2024 and highlights the significant level of engagement with Revenue leading up to the 1 May 2024 deadline which marked the date by which businesses had to put a plan in place to address their warehoused debt. It provides valuable insights into the efforts made by businesses to manage their debts and avoid insolvency. The Report also highlights the importance of engagement with Revenue and the potential consequences of non-engagement. To ensure their future financial stability, it is crucial for businesses to maintain this engagement and adhere to the terms of their Phased Payment Arrangement (PPA).

 

What are the key insights detailed in the Report?

The Report reveals that over 93% of the €3.2 billion debt, which was included in the warehouse at its peak in January 2022, has now been either paid in full, secured under a PPA, or is subject to ongoing PPA negotiations or refunds/credit claims awaiting approval for offset. This demonstrates a significant effort by businesses to address their outstanding debts.

The Report also highlights that €100 million of warehoused debt was collected in May 2024, and 9,987 PPAs, covering €973 million of warehoused debt, were secured after 1 April 2024. This indicates a significant level of engagement with Revenue in the weeks leading up to the 1 May 2024 deadline.
PPAs already agreed with Revenue up to May 2024 covered almost €1.2 billion of warehoused debt owed by 12,747 businesses. The majority of these PPAs (95%) will be completed within the standard five-year period, while the remaining 600 PPAs have been agreed for extended timeframes. This additional flexibility was agreed by Revenue based on individual circumstances and where the business concerned was able to demonstrate its future viability.

 

Why is continued engagement with Revenue important?

Revenue will continue to monitor compliance with the terms of PPAs. Businesses availing of PPAs must submit and pay all current returns and liabilities on time to continue to avail of the 0% interest rate. Where businesses are struggling to pay current taxes, the advice remains to engage with Revenue as soon as these difficulties arise, so that a mutually acceptable solution can be found.

Revenue issued demands to approximately 11,700 businesses that had debt in the warehouse but had not engaged with Revenue to address this debt ahead of the key deadline of 1 May 2024. Almost 40% of businesses that received this demand engaged with Revenue on foot of same. The remaining 7,024 businesses, with a total debt of €100 million, did not engage and have now been removed from the warehouse. As a consequence, this debt is now subject to normal collection and enforcement proceedings and is subject to interest at the standard rate of 8% or 10% as appropriate.

Businesses that fail to fulfil their financial obligations to Revenue may be determined insolvent and are at increased risk of the Revenue taking enforcement action against them. Should Revenue succeed in obtaining a court judgment, it is then empowered to implement further legal actions. Such actions might include measures like a judgment mortgage, compulsory sale, or potentially, company liquidation.

 

What options are available to businesses facing financial difficulties?

Companies encountering financial difficulties should proactively explore various restructuring options to manage their debt and ensure business continuity. These options include:

• Phased Payment Agreement (PPA): This involves applying to Revenue for a PPA, which facilitates the repayment of tax debts in instalments over a specified duration.
  
  

• Creditor Engagement: This involves with the company’s creditors to amend the payment terms of contracts, loans, or facilities, or to restructure the debt.
  
  
• Small Company Administrative Rescue Process (SCARP): SCARP is a rescue mechanism designed for small and micro companies that are, or are likely to become, insolvent. It provides a structured process to manage their debts.
  
  
• Examinership: This involves applying to a court for the appointment of an examiner. The appointed examiner can provide the company with a period of protection from creditor claims for a limited duration, typically between 70 and 100 days.
  
  
• Scheme of Arrangement: This strategy involves negotiating an agreement, known as a Scheme of Arrangements, between the company and its creditors. Once an agreement is reached, the company applies to the court to approve the proposal.

These options provide businesses with a lifeline during challenging financial periods, enabling them to restructure their debts and continue operations. Early engagement with financial advisors and legal experts is crucial in any of these processes to ensure that any restructuring plan is viable, compliant with legal requirements, and minimises disruption to the business operations.

 

Remaining vigilant

While the Report highlights the considerable progress many businesses have made in managing their debts, attesting to the Scheme’s essential role in supporting business stability, it also emphasises the importance of engagement with Revenue, especially for businesses that have yet to address their previously warehoused debt. As the Scheme concludes, businesses must remain vigilant in fulfilling their financial obligations to avoid potential legal repercussions and ensure their future financial stability.

 

Further reading

Covid-19 Support Schemes Debt Warehousing Final Statistics

Ireland: Revenue Warehouse Debt Scheme Update

Ireland’s New Restructuring Process for SME’s – The Small Companies Administrative Rescue Process (“SCARP”)




With thanks to Melanie Ardiff, Professional Support Lawyer, for contributing to this briefing.