Next steps needed with Covid support schemes winding up

AS we are in an era where most of the pandemic restrictions are now eased, it is important for businesses to understand the timing of the Revenue support schemes that are winding up and moving on to the next phase of dealing with the debts that were accrued due to the pandemic and how best to manage them.

If your business was availing of the debt warehousing scheme, you should have received a letter from the Revenue to advise you of any tax returns which may be overdue.

The warehousing of tax debt was introduced to assist businesses experiencing cash-flow and trading difficulties due to the Covid-19 pandemic.

With warehousing, you can defer paying some of your eligible tax liabilities until you are in a position financially to deal with the debt. The area which can be confusing is understanding the periods where the Revenue will not be applying interest and when will interest commence. The Revenue will contact the business to discuss the terms for paying any outstanding warehoused debt before the end of 2022 or early 2023 if the business qualified for the extension.

The debt warehouse term is made up of three distinct periods. No interest is applied to the warehoused debt during Period 1 and Period 2.

Period 1 began when the business first experienced cashflow trading difficulties due to COVID-19. Period 1 ended on 31 December 2021. All returns for qualifying taxes which fall in Period 1 are entered into the warehouse.

In December 2021, the Warehouse scheme was extended for businesses impacted by re-imposed restrictions.

The businesses must have already been eligible for warehousing and have a valid claim during the period from  January 1st 2022 to  April 30th 2022 for EWSS or CRSS.

For these businesses, period 1 has been extended until  April 30th 2022.

Period 2 is a one-year period which runs from January 1st 2022 to December 31st 2022. If your business qualifies for the warehouse extension, period 2 will run from May 1st 2022 to  April 30th 2023.

Period 3 starts on January 1st 2023, (or on May 1st 2023 if your business qualifies for the extension). On exiting Period 2, you must agree a Phased Payment Arrangement with Revenue for the warehoused debt. Interest will be applied from the start of Period 3 until the final payment date at a rate of 3%. Revenue’s press release on March 31st showed that the total debt eligible for the Debt Warehousing Scheme since its introduction is €30.9bn.

However, 90% of that debt has been paid, €3bn is currently warehoused.

The Minister for Finance announced the extension of the 9% Value Added Tax (VAT) rate for the tourism and hospitality industry for a further six months. Therefore, the 9% rate will remain in place for these sectors until February 28th 2023.

If you are self-employed and were claiming the Covid-19 Part Time Job Incentive for the Self-Employed, this scheme is being closed and the final payment will be made on May  31st 2022. After this date, if you are continuing to operate your business at reduced levels you may be eligible for support under the means tested Jobseeker’s Allowance scheme.

The Employment Wage Subsidy Scheme (EWSS) ceased for most businesses on April 30th 2022. However, if your business was directly impacted by the public health restrictions introduced in December 2021, the flat rate subsidy of €100 which applied for April and May will continue up until May 31st 2022. The EWSS will end on this date.

The Small Company Administrative Rescue Process (Scarp) is designed to address the specific needs of eligible small and micro companies in financial difficulties. It allows viable companies experiencing temporary financial problems to restructure with the agreement of creditors.

It has limited court involvement where creditors are engaged in the process and are positively disposed to a Rescue Plan. The process mirrors elements of examinership but in a simplified administrative content, thus reducing court involvement, making it potentially both quicker and cheaper. The Revenue has published guidelines on the Scarp scheme which includes published guidelines for process advisers.

Sources are revenue.ie, citizensinformation.ie, gov.ie, and enterprise.gov.ie

• Brian Cooper is an accountant with FDC Skibbereen.