The Budget announcement to extend the debt warehousing provisions to allow self-employed taxpayers to defer payment for a period of a year, with no interest applying, will have come as a huge relief to business owners. It could mean a cashflow saving to a typical self-employed person of anywhere between €15,000 to €20,000 this year, according to Big Red Cloud. The accountancy software experts say they believe that this money could mean the difference between survival and personal insolvency for a huge cohort.
While welcoming the move, the Irish company, whose customers include approximately 75,000 SMEs throughout Ireland, pointed out that although this is money in the pocket of businesses now – it will have to come out at some stage in the next year or two, to settle the outstanding tax liability. They advise that any businesses that avails of this needs to be mindful that there will be a double payment due eventually, which they will have to service.
Marc O Dwyer CEO of Big Red Cloud commented, “With the self-employed tax payment date fast approaching, these workers and businesses will be hugely relieved that they can delay their final 2019 tax payment and their 2020 preliminary tax for a year without interest or penalties. And even if they’re still struggling at that point, they can continue to defer it and pay just 3% interest thereafter, which is far lower than the interest that would ordinarily be charged. This is seriously useful and should mean the difference between many small businesses, such as taxi drivers and many others working in the hospitality industry, staying afloat or going out of business. However, we would be concerned that it took years to successfully move the self-employed to the current preliminary tax system where they pay their tax in the same year. The deferment could lead to a tsunami of tax debt that many may struggle to cope with while keeping their current taxes up to date. Even if these businesses get back to normal turnover volumes sometime next year, it’s unlikely that new business will be sufficiently booming to enable them to pay a double tax liability. The real hope is that there will be little or no tax due for 2020 as it was so poor, which would only leave the balance of 2019 and preliminary for 2021 to pay. While the Revenue have shown great flexibility and will do their best, the Minister’s assumption that all liabilities will ultimately be collected may be optimistic”.