The BT Blog #9
0On Coping with a Future Tax Tsunami
Guest Blog by Marc O’Dwyer, CEO, Big Red Cloud
The Budget announcement to extend the debt warehousing provisions to allow self-employed taxpayers to defer payment for a period of one 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 – money that could mean the difference between survival and personal insolvency for a huge cohort of businesses out there.
While we would welcome the move in order to help stabilise cash flow now, this money will have to be paid at some stage in the next year or two to settle the outstanding tax liability. 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.
With the self-employed tax payment deadline 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 Revenue have shown great flexibility and will do their best, the Finance Minister’s assumption that all liabilities will ultimately be collected may be optimistic.
Big Red Cloud is a leading supplier of online accounts software to the SME market, servicing over 75,000 businesses.
