There may be issues ahead with one Covid business support scheme

The Government this week announced further financial supports and subsidies for companies affected by the latest round of anti-virus restrictions, especially operators in the hospitality sector.

The bill for State wage subsidies alone is running at close to €10 billion since the start of the pandemic, with no end in sight.

There may be issues ahead, however, with another State scheme to help businesses – the tax warehousing scheme.

The scheme to ease companies’ cashflow allows SMEs to delay paying taxes to the State such as VAT and employers’ payroll charges for social insurance. Larger firms meanwhile must apply for permission to use the scheme. The payment of the taxes can be delayed at 0 per cent interest until January 2023, when interest of 3 per cent applies.

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By late summer, the payment of close to €2.5 billion of business taxes had been deferred or “warehoused” under the scheme, according to the Government. The latest restrictions and their inevitable impact on hospitality operators’ cashflows mean that bill will get higher.

But the tax has only been deferred, not waived as commercial rates have been. It must be paid back eventually. Some business representative groups, such as the Restaurants Association of Ireland, are now beginning to muse publicly about whether many pandemic-ravaged businesses will be able to pay it back.

The issue is reminiscent of the tensions that have arisen between retail landlords and store owners over rent bills for closure periods. Some retailers argued that they simply couldn’t afford to pay back all the accrued property debts and, in many cases, pragmatic deals were struck involving partial write-offs of the amounts owed.

Similarly, calls for the State to write off portions of warehoused tax for struggling businesses are likely to feature in 2022, ahead of the imposition of interest payments.