Irish companies with more than €2 billion of Covid-era warehoused tax debt have been urged by the chairman of Restructuring & Insolvency Ireland not to “bury their heads in the sand” as they have just over a year to pay what is owed or agree repayment schedules with Revenue.
Mark Woodcock, chairman of the forum for insolvency practitioners and a partner and head of insolvency and restructuring at law firm Fieldsfisher’s Irish practice, noted that an “unofficial moratorium” by banks and other major creditors against taking on debtors in arrears since the beginning of Covid “is dissipating”.
Mr Woodcock said his banking clients were looking at 2023 as “a new phase” and he expected an increase in litigation against borrowers in arrears that had not been “engaging constructively”.
“The pillar banks [AIB and Bank of Ireland] were extremely accommodating during Covid. However, they now feel there is more freedom to pursue people who are not engaging in debt,” he said. “The situation would have been worse if the Revenue debt warehousing project had come to an end last year. But companies that have been availing of this [facility] need to start engaging now.”
The State’s tax collector said last October it would extend the deadline for repayment of warehoused tax to May 1st, 2024, from an original due date of last January, or next month for certain organisations that had already qualified for an extension.
This means that businesses now have until May 1st, 2024 to pay off the warehoused taxes they owe or to agree a phased repayment deal with the State. Still, interest, at an annual rate of 3 per cent, will apply on amounts owed from the end of this month, though this is well below the normal rate on overdue taxes of 8-10 per cent.
The number of Irish corporate insolvencies rose by 23 per cent in the first quarter, to 119, according to PwC. On an annualised basis, the insolvency rate equated to almost 18 per 10,000 companies – still half the rate of the pre-pandemic level of 36 in 2019.
“The first piece of advice I give to directors of companies calling us about their struggles with debt is to pick up the phone to their bank or suppliers and discuss with them what they can and can’t afford,” Mr Woodcock said.
“Stakeholders in business usually just want certainty, and so lower monthly payments should be acceptable to both parties in the short term, otherwise there is an ever-increasing build-up of debt, a breakdown in relations, and inevitably a flood of litigation.”
