Debt Warehousing Scheme and Self-review of tax affairs

This correspondence, deemed a Level 1 Compliance Intervention, offers all eligible taxpayers the opportunity to self-review their tax returns for Period 1 (which ended on 31 December 2021 or 30 April 2022 where extension applied) and make an unprompted qualifying disclosure by 31 January 2023 in relation to any additional tax liabilities identified. Any additional tax liabilities identified will be eligible for the DWS up to the end of Period 2 (see extension announced below) and will benefit from a reduced 3% rate of interest via a Phased Payment Arrangement (“PPA”).

This represents a final opportunity for those who were eligible for DWS to regularise their tax returns for any undeclared tax liabilities. Following this, should Revenue identify tax defaults in the DWS periods, the taxpayer should expect to become ineligible for the DWS and all outstanding liabilities may become subject to immediate collection with the standard 8 - 10% rates of interest applying depending on the particular tax head with potential penalties also arising.

Separately, under the provisions of the DWS, the majority of taxpayers already in the scheme are required to have paid the debt(s), or enter into a PPA for all eligible Period 1 liabilities. If additional liabilities are included as part of the unprompted qualifying disclosure mentioned above, these additional liabilities may be included in the original PPA.

Important extension announced

Revenue announced an important and significant extension to the Debt Warehousing Scheme. Under the scheme, businesses with warehoused debt were due to enter into an arrangement with Revenue to deal with that debt by the end of the year (or by 1 May 2023 for those subject to the extended deadline). Given the current economic uncertainty, Revenue has extended the timeline to 1 May 2024.

This means debts in the scheme will continue to benefit from a 0% rate of interest until 31 December 2022 and a reduced 3% rate of interest thereafter (as opposed to the 10% rate of interest for VAT and Employer PAYE liabilities).  By 1 May 2024 taxpayers will have to either clear the debt in the warehouse or enter into a PPA.

Revenue’s self-review culture

This prompt by Revenue to undertake a self-review as part of the DWS is consistent with the culture of self-review that Revenue are attempting to cultivate with taxpayers. This is also evident by:

1. Revenue’s Statement of Strategy for 2021 - 2023.
2. The Code of Practice for Revenue Compliance Interventions and associated briefings on the Code.
3. The recently published Payroll Tax Compliance Intervention Tax and Duty Manual wherein Revenue have stated that employers should review notional pay regularly and carry out a self-review at least quarterly.

Actions and next steps

Our recent experience in supporting clients with Revenue interventions shows that the volume of Revenue Interventions is increasing to pre-pandemic levels and likely to be greater in the near future. One of the focus areas is on correct operation of the PAYE system, also known as “PMOD”.

We strongly encourage all taxpayers to undertake a self-review over the near term in order to identify any issues, which may need to be disclosed to Revenue and where possible included under the terms of the DWS. We recommend that employers carry out a self-review of their payroll submissions at least quarterly.

At Grant Thornton, we have a specialist team that can work with you to review your tax affairs, assist you with availing of the DWS, preparing your unprompted qualifying disclosure and structuring your PPA, and offer sensible guidance and support on managing a Revenue Intervention.

Revenue’s Business Division – deals with the majority of business taxpayers.

Revenue’s Personal Division – deals with the majority of personal or non-trading taxpayers, as well as not-for-profit organisations.