Tax debt is one of the most common forms of business debt in Ireland. PAYE that built up during a difficult trading period, VAT that accumulated over several quarters, a corporation tax liability from a profitable year that was never fully paid - these are the debts that sit on the balance sheets of thousands of Irish SMEs.
Revenue will not simply write off a tax debt. But Revenue will negotiate a phased payment arrangement (PPA) for a business that cannot pay in full immediately, where there is a genuine intention to resolve the liability and a viable business that can support the repayments.
A phased payment arrangement is not a concession or a forgiveness. It is an agreement to pay what is owed over time, with interest continuing to accrue on the outstanding balance. It is, however, a structured and workable route out of a tax debt position - and for many businesses, it is exactly what is needed.
What a Phased Payment Arrangement Is
A PPA is a formal agreement between a business and Revenue to repay an outstanding tax liability in regular instalments, typically monthly, over a defined period. The business pays the agreed instalments, Revenue does not pursue enforcement during the arrangement, and interest accrues on the declining balance throughout.
Revenue can agree PPAs for:
Income tax or corporation tax arrears. VAT arrears. PAYE/employer tax arrears. Combined multi-tax head arrears where the business owes across several taxes.
The arrangement covers the arrear balance - the debt already owed. It does not extend to current obligations: ongoing VAT returns and PAYE must continue to be filed and paid on time as they arise during the arrangement. A PPA that is not accompanied by full compliance with current obligations will not be approved, and an existing arrangement will be terminated if current obligations are not met.
What Revenue Needs to See
Revenue assesses PPA applications against the following criteria:
Is the business viable? Revenue is willing to work with businesses that have genuine trading substance and a realistic prospect of continuing to operate. They are less inclined to agree arrangements for businesses that are effectively insolvent - where the PPA would merely defer an inevitable liquidation. Having current management accounts showing a trading business with ongoing revenue strengthens the application.
Can the business service the proposed repayments? The proposed instalment amount must be realistic - enough to clear the debt in a reasonable timeframe, but not so high that the business cannot sustain the payments. Revenue will typically want arrears cleared within 12 to 36 months. Longer arrangements are possible in some circumstances but require a stronger case.
Are current obligations being met? As noted above, Revenue will not agree a PPA for arrears if the business is simultaneously falling behind on current tax obligations. Before applying, ensure all current returns are filed and payments are up to date (or that any current underpayments are also included in the arrangement).
Has the business made a genuine effort to pay before applying? Revenue is more sympathetic to a business that has been paying something towards the arrears but cannot clear the balance, than to one that has paid nothing and is now trying to negotiate.
How to Apply
Applications for PPAs are made to your local Revenue district - the Revenue office that handles your tax affairs. The application should include:
A cover letter explaining the circumstances that gave rise to the arrears and why the business cannot pay in full immediately. A statement of the current financial position of the business - current turnover, cash position, and immediate cash flow projections. A proposed repayment schedule - the amount per month and the length of the arrangement. An explanation of how current obligations will continue to be met during the arrangement.
Revenue may request additional information, including management accounts, bank statements, and a more detailed cash flow projection.
The application is assessed by a Revenue collector. If approved, the agreement is confirmed in writing, specifying the instalment amount, the payment dates, the total liability covered, and the consequences of default.
The Interest Position
Interest on unpaid tax continues to accrue during a PPA at the standard Revenue interest rate (currently 8% per annum, approximately 0.0219% per day). This is important: the total amount you eventually pay includes the original arrear plus all the interest that accrued from when the tax was originally due to when it is fully paid.
For a PPA arranged promptly - before the arrear has been outstanding for long - the interest addition is manageable. For arrears that have been outstanding for two or three years before a PPA is put in place, the interest can add materially to the total liability.
This is a strong practical argument for addressing tax arrears sooner rather than later. Every month of inaction adds to the interest bill. A PPA arranged now is cheaper than the same PPA arranged in a year’s time.
If the PPA Application Is Rejected
Revenue does not always approve PPA applications. Rejection typically occurs where the business is clearly insolvent and a PPA would not be in the interests of Revenue as creditor, or where the proposed repayment schedule is not credible.
If a PPA is rejected and the business genuinely cannot pay the arrears in full, the options narrow to more formal insolvency processes - examinership if the business is viable, or voluntary liquidation if it is not. This is the scenario where specialist insolvency advice, alongside accountancy advice, is needed. If your business is facing broader financial difficulty, understanding all the options early is important.
Defaulting on a PPA
If a business enters a PPA and then misses instalments or falls behind on current obligations, Revenue can terminate the arrangement and pursue enforcement. Enforcement options include sheriff seizure of assets, attachment of bank accounts, and sheriff seizure of book debts.
The PPA provides a structured breathing space - but only if the agreed terms are met. Before entering a PPA, be realistic about whether the proposed repayment amount is genuinely sustainable. A PPA that fails because the instalments were too ambitious is worse than a lower-instalment arrangement that is kept to.
Getting Help With a Revenue Payment Arrangement
Negotiating a PPA with Revenue is something that can be done by the business itself, but professional representation often produces a better outcome - both in terms of the terms agreed and in terms of the overall management of the situation. An accountant who knows the Revenue process and presents the business case clearly and credibly is more likely to secure a workable arrangement than an unprepared business owner dealing with Revenue for the first time.
At Malone and Co., we have been negotiating with Revenue on behalf of clients for over 35 years. If you have a tax arrear situation that needs to be resolved, a conversation with us is the right starting point.
Paddy Malone FCA AITI
Paddy is the principal of Malone & Co. Chartered Accountants in Dundalk. A Fellow of Chartered Accountants Ireland and a Chartered Tax Consultant with the Irish Tax Institute, he has been advising businesses across County Louth and the North-East for over 35 years.