The deferral of tax liabilities for firms significantly boosted by Covid-19 restrictions will prove a vital lifeline for businesses as they gradually reopen.
The decision by the Department of Finance to defer tax liabilities for businesses significantly impacted by Covid-19 restrictions will deliver a real cashflow saving at a time when many are looking forward to begin trading again.
The deferral will be for taxes arising from 1 March 2020 to the date that businesses recommence trading. Payment of those liabilities will be deferred for a period of 12 months on an interest-free basis, with interest subsequently applying at a reduced rate of 3pc until the liabilities are paid.
“The liabilities that will benefit from the relief and the timing of the repayment of those liabilities will vary for businesses depending on when they recommence trading under the government plan”
The Revenue Commissioners stated that the relief will apply to VAT and employment taxes. Prior to this deferral of taxes was available on a limited basis.
Bringing business back
“We welcome the fact that the scheme will apply to businesses in all sectors of the economy that have been negatively impacted by Covid-19,” said John Stewart, tax director at Deloitte Ireland.
“The deferral of VAT and PAYE payable to the Exchequer delivers a real cash-flow saving for businesses at a time that liquidity is of critical importance due to the immediate and significant economic impact of Covid-19.
“The deferral is effectively a 12-month interest free loan from the State, followed by a low interest loan of 3pc, which is a 70pc reduction on the interest rate of 10pc that is usually applied to outstanding tax liabilities.”
Stewart said that the first liabilities to benefit from the relief should be the VAT due for the two month period of January and February, and employment taxes due for the month of February.
“The liabilities that will benefit from the relief and the timing of the repayment of those liabilities will vary for businesses depending on when they recommence trading under the government plan.
“In advance of the expiry of the 12-month period, businesses will have to agree a repayment schedule for the deferred taxes with the Revenue Commissioners.
“We welcome the commitment from Revenue that they will be flexible when agreeing the repayment schedule and we expect that this flexibility will apply to both the duration and the amount of the scheduled repayments,” said Stewart.
Written by John Kennedy (firstname.lastname@example.org)
Published: 7 May, 2020