Businesses once again in jeopardy

It seems certain further action will be needed from the authorities to save many businesses and the jobs they provide. File Picture

Hospitality sector

Just a few short weeks ago, the country was consumed by a crisis in the hospitality sector — focusing particularly on the viability of many restaurants, scores of whom announced their closure due to increasing costs and staffing issues.

One other factor in the rash of such businesses shutting up shop, was the fact the Government had ‘warehoused’ tax debts during the covid pandemic but was now looking to make good on those liabilities.

The thinking behind the May 2020 plan was that those businesses with tax liabilities and no source of income with which to pay them, could ‘park’ the debts for a specified period of time to relieve the financial burden on them.

Some 250,000 businesses took advantage of the plan and €3.2bn worth of PAYE taxes, VAT, and wage subsidy overpayments was built up in the notional ‘warehouse.’

For the following 12 months, the debt lay dormant with a 0% interest rate, but thereafter the rate rose to 3% to encourage businesses to pay off outstanding monies. 

In February, the authorities reverted to the 0% rate because of cost-of-living pressures businesses were facing.

From tomorrow, however, businesses will have to either cough up what they owe or reach an agreement with the Revenue Commissioners. The sums involved are not inconsequential and €1.6b remains unpaid by 53,000 businesses.

More than 9% of those have a liability of more than €50,000 and it is critical for them to engage immediately with the tax authorities to try and reach an accommodation.

Undoubtedly, we will see a rash of insolvencies in the coming weeks and while Government has acted with the €257m Increased Cost of Business Scheme, the closing date for which is also tomorrow, it may not be enough.

It seems certain further action will be needed from the authorities to save many businesses and the jobs they provide. We should expect to see plenty more lobbying for a 9% VAT rate for certain sectors as Budget 2025 plans start to take shape.