Tuesday 12 December 2017

Revenue gets tough with companies over tax debts

Laura Noonan

Laura Noonan

Businesses that want extra time to pay off their tax bills will now have to submit detailed information on their banking arrangements to the Revenue Commissioners.

Rules that came into force on January 1 require anyone applying for "phased payment arrangements" to complete a new standardised form rather than the old process of making an agreement with their Revenue contact.

The form asks for information about debts currently in place, and also asks for details of the company's last banking review, the outcome of that review and whether the firm has had dealings with the Credit Review Office.

The credit crunch and recession has led to a 30pc rise in "phased payment arrangements" in the last two years, and almost 16,000 such arrangements were in place at the end of September.

A spokesman for the Revenue Commissioners said the new protocol was introduced to "assist" those applying for the instalment arrangements, since it would lead to a "speedier" processing of applications.


He also stressed that the information had all been sought under the previous more informal regime, though some industry sources disputed this and said the information demanded varied on a "case by case" basis and was not always so extensive.

Industry sources also claimed the form was an attempt by Revenue to ensure that companies who are availing of phased payment arrangements had explored all other avenues of financing and were using it as a last resort.

"A few years ago, it was really simple, you could almost agree it over the phone," said one source. "But now they're asking for more and more information to make sure people aren't just putting Revenue to the back of the queue (for payment)."

Phased payment arrangements are described as a "concession" on Revenue's website, and are only supposed to be used by companies who are unable to meet their Revenue obligations in the normal way.

Interest is charged, to discourage companies from over-using the facility, and Revenue's literature stresses the importance of "paying as much debt as possible upfront".

The number of companies paying off their tax bills by instalment shot up by close to 29pc in the two years to September 2011, when 15,751 such arrangements were in place.

"It's become an important source of finance for companies," said one financial controller. "If the banks won't give a firm short-term credit, then they can do this instead. It's a lifeline for a lot of businesses."

The new form also asks for extensive details of any debts owed to the firm and bad debt provisions, and companies have to "set out clearly the basis on which you believe this is a viable business".

The form goes on to ask businesses to explain why the tax debts "have not been made as they fall due" and "why that debt cannot be paid in a single sum, financed by borrowing if necessary".

"Critical issues for Revenue in deciding on the appropriateness or otherwise of extending a phased payment arrangement are the overall viability of the business and the capacity of the business to meet the terms of a repayment schedule," a spokesman said.

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