Revenue’s ongoing negotiations earlier this year with companies who availed of a pandemic-era warehoused tax debt scheme has been cited as a key reason for a decline in the number of small company restructurings in the first half of 2024, a new survey has found.
According to research from Azets Ireland, 13 Scarp restructuring procedures started in the first half of 2024 – a decrease of 28 per cent on the same period in 2023. In total, 68 small businesses started restructuring processes since the Scarp scheme was created as an option for small businesses in December 2021, some 33 of those processes – or nearly half of them – starting in 2023 alone.
The Scarp process aims to facilitate out-of-court debt restructuring for small businesses that are deemed to be viable. An adviser is appointed to prepare a rescue plan and work with creditors to stabilise company debts.
The hospitality industry accounts for the greatest number of cases this year, followed by the logistics and construction sectors, the research said.
Among the businesses that have completed the process were Ann’s Bakery, a Dublin restaurant on Mary Street; Showtime Analytics, a data analytics specialist; and Ecogas Limited, a retail and distribution gas business in Co Louth, Azets said.
The index shows that 206 jobs have been saved so far this year as a result of the Scarp process. Some 806 positions have been saved since the beginning of the scheme in 2021.
Speaking to The Irish Times, Azets Ireland’s advisory and restructuring partner Dessie Morrow said the fact hospitality accounted for the most cases was “down to discretionary spend” being pared back by consumers in the cost-of-living crisis.
Mr Morrow said awareness of the Scarp process was low across small businesses in Ireland, something that could put the survival of SMEs in jeopardy as it is “an important restructuring option that can provide businesses with the necessary flexibility to come up with pragmatic solutions to financial difficulties”.
“Given more than 12,500 Irish businesses are currently undertaking phased payment arrangements with Revenue on around €1.65 billion of warehoused tax debt, a greater number of small businesses may need to restructure in the months ahead as the viability of those repayment plans has not yet been fully road-tested,” he said.
The research also found that more than 360 jobs have been saved due to examinership cases over the past six months. Some 52 jobs were saved at retailer Freshly Chopped when it recently restructured its business.
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