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Irish Times
11-07-2025
- Business
- Irish Times
Revenue says it backs Scarp process amid criticism of opt-out mechanism
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. READ MORE 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.
Irish Independent
08-07-2025
- Business
- Irish Independent
Revenue veto ‘caps use of Scarp small business rescue scheme'
The latest Scarp Index from accountancy firm Azets, where Mr Morrow is a partner, shows construction, hospitality and alcohol producing sectors accounted for the highest proportion of businesses using the scheme so far this year. It also shows a 15pc increase in the number of businesses being restructured using the Scarp, compared to the first half last year, an increase that is consistent with higher numbers of insolvencies and other forms of distress. The latest index shows a total of 100 business have now used the Scarp process since scheme launched in 2021. Mr Morrow says 1,314 jobs have saved thanks to use of the rescue process. Scarp was introduced following lengthy consultation with industry as an alternative to the more expensive and lengthy examinership regime. The idea is to provide a simplified restructuring mechanism for viable small companies facing financial distress, with only a relatively light court involvement. A Scarp process is initiated by companies themselves and can begin without any court approval being required, helping to slash overall costs. The first step is the appointment of a specialist adviser – generally an accountant specialising in insolvency who must then notify creditors the process is under way and they have 50 days to come up with a rescue plan acceptable to the various affected parties. Including a 21-day cooling-off period, the process must be concluded within 70 days. Creditors who stand to lose under a rescue deal can object. Crucially however, state agencies including Revenue and the Department of Social Protection, can opt out of a Scarp arrangement, meaning even if a deal is done with other creditors and landlords, for example, a business may be left with what is regards as unsustainable tax debts including warehoused Covid era liabilities. Mr Morrow says Revenue has in practice been willing to engage with rescue efforts, but the risk it will not row in behind a scheme is a disincentive to businesses operators from attempting to restructure. 'The Revenue opt out does deter businesses,' he said. It is one of a number of issues identified by Azets following an analysis of the 100 Scarp cases. It is calling for the existing Revenue opt-out at the start of the process to be removed. It also argues the short time frame of the process can create resource constraints in particular for micro companies where an individual may be responsible for a number of areas within the business – everything from staffing the counter to bookkeeping. The proposed solution is to bring the process to a pre-populated form-filling stage as a first phase. Meanwhile, the Scarp Index for the first half of the year shows 15 processes have started to date in 2025: hospitality (20pc) accounted for the highest proportion of cases, followed by the construction (13pc) and alcohol producing (13pc) sectors, an indicator that uncertainty around trade tariffs may already be impacting the export orientated boutique spirits sector. Among the businesses to have successfully undergone Scarp with the support of Azets advisers this year are Big Mike's Restaurant in Blackrock and New Century Engineering.
Irish Times
07-07-2025
- Business
- Irish Times
Scarp cases up 15% in 2025 amid ‘economic uncertainty'
The number of small and micro businesses looking to restructure their debts through the small business rescue scheme has jumped by 15 per cent so far this year, with the hospitality sector responsible for the biggest proportion of cases, Azets Ireland has said. Unveiled in 2021 as a more cost-effective alternative for smaller businesses to the examinership process, the Small Companies Administrative Rescue Process (Scarp) facilitates simplified out-of-court debt restructuring for viable companies. A new analysis of the regime by Azets Ireland, formerly Baker Tilly Ireland, found that some 1,314 jobs have been saved through the process since 2021. Almost three-quarters of the 100 businesses that have gone through the small business rescue regime have survived, just over half of which were based in Dublin, the restructuring and corporate advisory firm said on Tuesday. READ MORE In 2025, 15 Scarp cases have commenced this year, up 15 per cent on the same period last year, Azets said. How the wealthy are buying up land to avoid inheritance tax Listen | 22:03 Hospitality accounted for 20 per cent of new Scarp cases this year, followed by construction and the alcohol-producing sectors, which accounted for 13 per cent each. 'In a period of heightened economic uncertainty, Ireland's SMEs are navigating challenging trading conditions, from rising costs to elevated energy costs and supply chain issues,' said Dessie Morrow, partner in advisory and restructuring at Azets Ireland. 'In sectors which are heavily export dependent, the unknown position on tariffs and how that might recalibrate the trading relationship has caused considerable uncertainty and a slowdown in key decision making. 'This can have a major impact on firms from production slowdowns to pauses in capital expenditure and is particularly challenging for firms already struggling with the high cost of doing business.' Azets Ireland, which has been involved in 33 per cent of all successful Scarp cases since 2021, wants the Government to look at ways of making the process more attractive for qualifying firms. At the moment, the Revenue Commissioners can exclude tax debts from the scheme if it has concerns about the company, if it has a history of noncompliance. Among other things, Azets said the Government should consider removing this opt-out at the start of the process, which it said is 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,' Mr Morrow said, adding that removing some of the administrative burden on businesses would make it a more viable option for under-pressure firms. 'By reducing the burden on businesses and enhancing the flexibility of Scarp, we can support the future viability of more small businesses that may need to restructure in the months ahead,' he said.
Irish Independent
03-07-2025
- Business
- Irish Independent
Hospitality sector continues to see elevated number of insolvencies during first half of the year, says Deloitte
But services, hospitality and construction were still the hardest hit sectors during that period, bearing the impact of persistently high operating costs. A doubling of the number of court liquidations in the period, to 42, has been attributed to companies being unable to meet phased payment agreements with the Revenue Commissioners as part of the pandemic debt warehousing programme. Revenue was the petitioner to the courts in 27 of the 42 cases. Deloitte said that corporate receiverships rose 37pc in H1, with significant activity by alternative lenders enforcing real estate-backed loans that have defaulted or matured without resolution. The number of firms undergoing formal restructuring via examinership or via the Small Company Administrative Rescue Process (Scarp) has jumped 56pc in the first six months of the year compared to the first half of 2024, however. The Deloitte report shows that the number of receiverships rose 37pc to 71 in the first half of the year. Most of those receiverships were initiated by alternative lenders. The hospitality sector had 66 insolvencies in the first half of the year. That's down 14pc compared to the first six months of 2024, but remains elevated. Hospitality venues that have entered insolvency processes in recent weeks include the company behind Captain Americas on Grafton Street in Dublin, and Dylan McGrath's Fade Street Social, also in the capital. The hospitality sector has the highest number of insolvencies of any industry in Ireland when services are split into subsectors. Restaurants are disproportionately impacted within this sector, due to legacy debt issues, difficulty attracting and retaining staff, and energy costs in Ireland being the most expensive in Europe, noted the report from Deloitte. 'Hospitality continues to experience a high number of insolvencies, despite the drop in 2025 so far,' said James Anderson, turnaround and restructuring manager at Deloitte Ireland. He said the expected reintroduction of a 9pc Vat rate for the sector is unlikely to favourably impact the insolvency rate due to the sector's legacy issues. There were just 14 appointments under Scarp in the first half of 2025, compared to seven in the first six months of 2024. Scarp aims to facilitate simplified out-of-court debt restructuring for viable small companies. But Scarp has not had the kind of traction that might have been expected since it was introduced in 2021. Just 99 appointments have been made under the system since then. 'Scarp has proven to be a successful process that saves companies and jobs,' said Mr Anderson. 'It is disappointing that awareness remains low despite a success rate of over 70pc. It is crucial that an awareness campaign is invested in, so more people are aware of it.' He added: 'Even though insolvency numbers for the year to date are similar to 2024 levels, there are significant headwinds to consider for the rest of the year, with all the ongoing geopolitical and trade tensions.'
Irish Examiner
02-07-2025
- Business
- Irish Examiner
Insolvencies steady but companies face 'significant headwinds' for rest of the year
Company insolvencies have declined slightly so far this year, but given the significant international trade tensions, businesses are facing 'significant headwinds to consider for the rest of the year'. According to Deloitte, so far this year there have been 407 insolvencies — down by 1% compared to the same period in 2024 — with the majority of these being seen in the services and hospitality sectors. There have been 173 insolvencies in the broad services sector, while there have been 66 in the hospitality sector. While the hospitality sector saw a 14% drop in insolvencies year-on-year, Deloitte said the sector continued to face a high level of insolvencies. The firm said hospitality had the highest number of insolvencies of any industry in this country when services are split into subsectors. 'Restaurants are disproportionately impacted within this sector, due to legacy debt issues, difficulty attracting and retaining staff, and energy in Ireland being the most expensive in Europe,' Deloitte said. Deloitte Ireland turnaround and restructuring partner James Anderson said while insolvency rates were 'broadly in line with 2024', given the 'ongoing geopolitical and trade tension, there are significant headwinds to consider for the rest of the year'. According to Mr Anderson, company-led closures are down so far this year, while company-led restructuring has increased. There were 14 Small Company Administrative Rescue Processes (Scarp) during the first half of this year — up from seven during the same period in 2024. The Scarp scheme was introduced in late 2021 to help small and micro firms which are still viable, yet insolvent, restructure their debts and avoid liquidation. However, uptake of the scheme remains low. 'Scarp has proven to be a successful process that saves companies and jobs. It is disappointing that awareness remains low despite a success rate of over 70%. It is crucial that an awareness campaign is invested in, so more people are aware of it,' Mr Anderson said. There have been 99 Scarp appointments since its introduction, which represents just 4% of all insolvencies in that time period. However, creditor-led enforcement activity has increased significantly across both court-appointed liquidations and corporate receiverships. 'Court-appointed liquidation activity arising from unresolved debts are up by 121%, with Revenue petitioning in 64% of these appointments,' he said. Deloitte said the rise in court liquidations could be attributed to companies being unable to meet phased payment agreements with Revenue as part of the covid debt warehousing programme. 'Corporate receiverships have increased by 37%, with significant activity by alternative lenders enforcing on real estate-backed loans which have defaulted or matured without resolution.' Read More Bar and pub sales drop 7% despite wider retail sales rise
