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Accounting for VAT on Cash Receipts Basis

VAT is normally accounted for on the invoice basis. This means that when a taxable person raises a sales invoice the VAT is payable in the period pertaining to the invoice date regardless of whether or not the taxable person has been paid for the supply in that period. Certain taxable persons can opt for the cash receipts basis of accounting, under which the taxable person is not required to account for VAT until payment for the supply is actually received.

The following criteria must be satisfied to qualify for the cash receipts basis of accounting for VAT.

  • VAT-registered traders whose supplies of goods or services are almost exclusively (at least 90%) made to unregistered persons
  • VAT-registered traders whose annual turnover does not exceed or is not likely to exceed €1,000,000

It should be noted that the use of this basis of accounting in no way removes from a VAT-registered trader his or her obligations as regards the issue of invoices and other documents, the maintenance of records, lodgment of returns etc.

Transactions between connected persons are excluded from the moneys received basis of accounting. VAT on any transactions between such persons must be paid by reference to the normal invoice/sales basis. VAT on property transactions must always be accounted for on an invoice basis.