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.
