An extension to the Debt Warehousing Scheme has been announced by the Revenue Commissioners.
The Debt Warehousing Scheme (DWS) was introduced during the COVID-19 pandemic to provide support to businesses that were experiencing liquidity and trading difficulties. It has permitted businesses to “warehouse” or defer payment of their tax debts for a specified period.
Businesses have until 31 December 2022 to discharge their warehoused debt to Revenue without any interest being applied to that debt. From 1 January 2023 a 3% interest rate will apply to warehoused debt. Ordinarily a 10% interest rate applies to late payments to Revenue.
Prior to the latest announcement, the reduced 3% interest rate was only going to apply until 1 May 2023. However, Revenue has now announced that this rate has been extended until 1 May 2024. In addition, companies that will have debts outstanding to Revenue after 1 January 2023 can enter into a Phased Payment Agreement with Revenue in respect of the repayment of the outstanding amounts.
The extension is a response to the challenging economic environment that businesses are currently facing – a crisis of high energy prices while attempting to recover from the pandemic.
The DWS has been credited with enabling many small and medium sized companies to avoid insolvency during the COVID-19 pandemic. At its peak, over €3.1 billion in Revenue debt was warehoused and €2.58 billion remains warehoused. It is hoped that the extension of the scheme will particularity be of benefit to businesses in the hospitality sector, many of which are predicted to come under pressure in the first quarter of 2023.
For companies in distress, directors should be mindful of their duties to the company (and its creditors) if the business is unable to pay its debts as they fall due. Directors should also be aware of the various restructuring options (such as SCARP which is now available to small companies) which companies can avail of to reset a business. For more information in respect of the obligations of directors and in relation to the legal options available to business to restructure their debts, do not hesitate to contact a member of our insolvency and restructuring team.
Jill Callanan JCallanan@lkshields.ie
Clare Dowling CDowling@lkshields.ie
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