Letters, letters, and more letters. They are on the way. In this Autumn Tax update, we will let you know what’s coming down the line for businesses.
The main points we will look at are
- Debt Warehousing – Self Review
- Debt Warehousing – End of Period 2
- Local Property Tax
- Ulster and KBC bank accounts
- Tax clearance and RCT rate reviews
Debt Warehousing – Self Review
Revenue are offering a self-review for Period 1 to those in the debt warehousing scheme. This is where you identify additional, Vat, PAYE, or Income Tax liabilities in that period. Businesses can avail of a qualifying disclosure for these liabilities. The deadline for making the disclosure is the 31st of January 2023.
Any liabilities arising from the disclosure can be subject to a Phased Payment Arrangement [PPA] at a 3% interest rate. You can also pay the liabilities in full, with the disclosure.
Revenue will write to those who availed of the debt warehousing scheme first. Then they will write to other taxpayers in the business and personal divisions. The letters are due at the end of this month. If you do a self-review and avail of this disclosure the benefits are
- Reduced penalties
- Lower interest rate – 3% compared to 10% for Vat & PAYE
- No publication
- Can avail of a PPA
That is the carrot. And the stick. If Revenue identify tax debts, the taxpayer can lose the benefits of debt warehousing.
Debt Warehousing – End of Period 2
For most taxpayers, Period 1 ended on the 31st of December 2021. Period 2 of 1 year started on the 1st of January 2022 and will end on the 31st of December 2022. Period 2 is for a year where you park your Revenue debt at 0% interest.
Revenue will write to taxpayers in October, where their period 2 is coming to an end in December 2022. Per Revenue 70% of the letters will come by post and 30% will go to ROS inboxes. The letters will confirm the tax debts warehoused. They will also ask the taxpayer to engage with Revenue to pay the debt or go into a PPA.
The standard payment terms for a PPA will be a down payment of 25% with the balance spread over 36 months. Of course, Revenue will be more than happy to get a higher deposit or payment in full. A taxpayer can request non-standard payment terms through the online PPA facility. If this was for a lower down payment or a longer term, Revenue will request more information. In these cases, Revenue have said they will adopt a pragmatic approach.
What we don’t know is by when a taxpayer must make a down payment and when the PPA system will close.
Approximately 24000 had their debt warehousing revoked, mainly in the business division. This is for not being compliant with tax returns and other tax issues. As such it is a serious position for taxpayers. The tax debts warehoused fall due immediately and higher interest rates kick in. Once these tax issues are up to date then it is possible to get back into the scheme.
Local Property Tax [LPT]
Revenue will write to taxpayers, registered for Income Tax and Corporation Tax, that don’t have their LPT up to date. Those taxpayers that must file Income & Corporation Tax returns risk facing a surcharge. That surcharge is on top of the LPT liability that they must pay. Be careful on this one as you can end up paying on the double!
There is now a function on the Form 11 that will identify an LPT surcharge with an “LPT advisory message”. This will apply to the latest version of the form 11.
Bank Account Details
As we know both Ulster Bank and KBC are exiting the Irish market. Taxpayers that have accounts in these banks with Revenue need to be careful. The potential problems are
- Not paying Revenue on time
- Not getting your tax refund owing
When you pay and file through ROS for Income Tax and corporation tax you can get extend the payment dates. Should you not pay on the extended deadline you run the risk of being late and surcharges.
Certain businesses, like building and food companies, can be in a Vat refund position. Delays in getting this vital cash flow back into the business could be detrimental.
Tax Clearance and RCT rate reviews
Revenue confirmed that periodic reviews of tax clearance have recommenced. They are writing to taxpayers where they have identified an issue that could result in losing tax clearance.
Some of our clients got emails this week so this has started already.
E-RCT bulk rate reviews started in August and the latest review was on the 10th of September. Anyone identified as having their RCT rate increased will get a letter stating the reasons for the increase. So, if you go from 0% to 20% or 35% you will only get 80% or 65% of the payment from the Principal Contractor. The principal will pay the withheld amount to Revenue. This could present a cashflow difficulty for the subcontractor.
The principal contractor needs to be very careful around reporting payments to subcontractors. There are penalties for not reporting payments correctly. The penalties are higher where the subcontractor is on the 20% or 35% deduction rate.
- If you want an easier life with minimal Revenue contact, make sure you are tax compliant
- Sort out small issues like LPT before filing Income Tax and Corporation Tax returns
- Those in the RCT space need to be careful. Subcontractors will have their money resting in Revenue bank account. Principal Contractors must be mindful of the penalties.
- There is an opportunity to self-review Vat & PAYE issues for Period 1. Be aware of these dates for your business
- Put a plan in place to pay down the tax debt that you have warehoused. You can start doing that now. But be mindful of giving Revenue all your money if the business needs to hold onto cashflow for other bills. The interest rate at 3% is attractive and you can spread for 36 months or longer in some cases.
- Tax compliance has never been so valuable. Invest in your finance function with a super bookkeeping process.
- Spare a thought for all the An Post workers delivering the letters.
Want to make sure your tax returns are on time every time? If so, Start here