REVENUE RESPONSE TO COVID-19
An SME, as defined by Revenue for tax purposes, is a business with turnover of less than €3 million who is not dealt with by either Revenue’s Large Cases Division or Medium Enterprises Division.
These relief measures recognise the cash flow difficulties SME businesses may now find themselves in and includes benefits and payments for both employers and employees.
VAT and PAYE
Revenue has confirmed that they will work with taxpayers to resolve payment difficulties and has asked that any affected businesses, not limited to just SMEs, take the following proactive steps:
• Taxpayers should continue to file all tax returns, e.g. bi-monthly VAT returns and monthly PAYE returns, on time.
• Engage with Revenue as soon as possible where they are facing difficulties in paying tax liabilities.
Following on from this advice, Revenue has also announced the following relieving measures, with immediate effect:
• Interest on late payments of January/February VAT and both February and March PAYE liabilities are to be suspended.
• All Revenue debt enforcement activity will also be suspended until further notice.
While these measures are welcome, a greater challenge may lie in the ability to pay PAYE/PRSI liabilities.
Apart from these being monthly payments, these represent fixed liabilities which need to be made if staff are to be paid and retained.
VAT returns should be less problematic given their link to turnover, although any expense decisions will now need to be carefully taken in these unprecedented times.
In further recognition that late tax payments are a distinct possibility, Revenue has confirmed that the current tax clearance status will remain in place for all businesses over the coming months.
The planned RCT (Relevant Contracts Tax) review scheduled to take place in March 2020 is suspended. RCT is a withholding tax that applies to certain payments by principal contractors to subcontractors in the construction, forestry and meat-processing industries. The rates of tax are 0%, 20% and 35%. The review was designed to assess the current rate applicable to each subcontractor in the eRCT system and determine whether a different rate should apply.
The suspension will allow lower rates of RCT to be withheld in cases where a higher rate should in fact be due.
In the case of subcontractors, existing rates will continue for now. Subcontractors can opt to ‘self-review’ within the eRCT system where they can check their current rate and apply for a reduced RCT rate.
Critical pharmaceutical products and medicines will be given “green routing” status for customs purposes in order to ensure an uninterrupted importation and supply process during these exceptional and difficult times.
This is a proactive stance Revenue has taken but in a time of uncertainty it remains to be seen whether they will be sufficient to allow SMEs to remain solvent through these difficult times.
With the impact of the pandemic likely to be long-lasting, calls for further help and emergency legislation to cut employer tax rates and/or reduce interest on late tax payments, short-term tax holidays for affected businesses and a reduction in VAT rates cannot be ruled out.
Read more at the COVID Resource centre here