Revenue has reiterated its support for the Small Company Administrative Rescue Process (Scarp) process and said its recently criticised opt-out mechanism was “reserved strictly for cases involving non‑compliance, audits, or ongoing tax appeals".
This comes following an analysis of the Scarp regime published by Azets Ireland, formerly Baker Tilly Ireland, on Tuesday. The analysis found that some 1,314 jobs have been saved through the process since 2021 but recommended the Government consider removing a Revenue opt-out from the scheme.
The Scarp process, which has been used in the past year to aide companies such as Waterford’s Blackwater Distillery and Scrumdiddly’s, is a rescue mechanism for smaller Irish businesses. In effect, an examinership-light process.
Established in December 2021, it is designed to facilitate simplified out-of-court debt restructuring for small businesses deemed to be viable at a lower cost and with less bureaucracy than the more familiar examinership scheme.
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Under its present construction, Revenue can exclude tax debts from the scheme if it has concerns about the company, if it has a history of noncompliance.
Azets said the Government should consider removing this opt-out at the start of the process, which it said was deterring some businesses from applying for the scheme.
“Notwithstanding the Revenue’s positive engagement with the scheme, the ability to opt out is a deterrent to some business owners considering the process,” said Dessie Morrow, partner in advisory and restructuring at Azets Ireland.
In a statement on Friday, Revenue said it “remains a committed participant in the Scarp process”.
“Our opt‑out right is reserved strictly for cases involving non‑compliance, audits, or ongoing tax appeals,” Revenue said.
Revenue clarified that it only exercises its opt-out right in two situations. Firstly, in cases in which it cannot quantify the company’s debt due to; outstanding returns or other relevant information, an ongoing audit or intervention; or an active tax appeal. Or in cases in which company or its directors have a track record of poor compliance.
Since the introduction of the process, of the 99 Scarp applications that have been made, Revenue exercised its op-out right in 19 cases.
Revenue referred to commentary noting the opt-out mechanism could deter companies from entering the process but said the only reason a director might be discouraged by the opt-out would be the anticipation of legitimate concerns.
“Businesses that act early, engage openly, and address compliance issues will continue to find Revenue a willing and constructive partner in achieving a successful rescue,” it said.
