The Revenue Commissioners introduced the Debt Warehousing Scheme in 2020 to assist businesses that were facing financial difficulties as a result of the COVID-19 pandemic. The scheme provided for the deferral of tax liabilities including PAYE and VAT, subject to certain qualifying criteria. The scheme has been extended on a number of occasions to allow companies to address any cash flow shortfalls before the warehoused debt became repayable, but interest at a rate of 3% has been accruing on the warehoused amount since 1 January 2023.
The scheme is now set to expire on 1 May 2024.
2023 has been a challenging year for cash flows with interest rates, wage inflation and price inflation remaining stubbornly high. It is now vital that any business which availed of the scheme takes steps to address the repayment of the deferred liabilities. Businesses should make a plan to deal with warehoused debt at the earliest possible opportunity, whether that be by way of phased repayment or otherwise. A business may face enforcement from the Revenue Commissioners if it has failed to engage and has not either repaid or agreed a phased repayment plan for the warehoused debt in advance of 1 May 2024. Having the warehoused debt repayments structured in a pre-planned practical and realistic schedule will allow businesses ensure their viability in the long term.
Prevention is always better than the cure, so if you anticipate a cash-flow challenge, you can take proactive steps to address it in advance. There are a variety of options available, ranging from SCARP to Examinership.
SCARP is an out of Court restructuring process specifically designed for companies which meet two of the following three criteria:
- The turnover does not exceed €12 million;
- The balance sheet total does not exceed €6 million; and/or
- The average number of employees does not exceed 50.
Examinership is similar but is conducted under Court supervision. As a result, Examinership is an option where a SCARP cannot be achieved. It is supervised by the High Court but can be undertaken in the Circuit Court where companies meet two of the following three criteria;
- The turnover does not exceed €8.8 million;
- The balance sheet total does not exceed €4.4million; and/or
- The average number of employees does not exceed 50.
Please do not hesitate to contact Barry Cahir or Simon Murphy in our Corporate Restructuring team to discuss the preventative restructuring options that are available.