VAT – Moneys Received Basis of Accounting

With effect from 1 May 2014 the turnover threshold for traders who account for VAT on the moneys received basis (also known as cash receipts basis) was increased to €2m from €1.25m.

Under the invoice basis a trader is liable to account for VAT when an invoice is issued to a customer. Whereas under the moneys received basis a trader is liable to account for the VAT on an invoice when payment is received from the customer.

Conditions to Qualify

To qualify for the moneys received basis a trader must satisfy one of the following two conditions:

–          Annual turnover does not exceed €2m, or

–          At least 90% of the traders supplies must be made to customers who are not VAT registered or are not entitled to claim a                 full deduction of VAT.

Any eligible VAT-registered trader who wishes to account for VAT on the moneys received basis should apply in writing to Revenue for permission to do so, setting out the following information:

–          Name and address.

–          VAT registration number.

–          Nature of the trader’s business activity.

–          The percentage of turnover from taxable supplies, if any, which relate to supplies to unregistered persons for whichever of             the following periods is the shortest:

  • the period of 12 months ending on the last day of the taxable period prior to the application, or
  • the period from the commencement of the trader’s business activities to the last day of the taxable period prior to the application
  • An estimate of the percentage turnover from taxable supplies to unregistered persons for the last 12 months from the start of the taxable period during which the application is submitted.
  • Amount of turnover if under €2m.

Permission from Revenue to account for VAT on the moneys received basis has effect from the start of the period during which it is given or from a subsequent date if so specified.

Review of Eligibility

It should be noted that persons may not change from the invoice basis of accounting for VAT to the moneys received basis, or vice-versa, without first having received permission from Revenue.

Where a trader already accounting for VAT on the invoice basis obtains permission to change to the moneys received basis, that trader is liable for VAT on any monies received on and after the approved date of the change. This does not include any payments on which VAT has already been accounted for in respect of goods and services supplied while accounting on the invoice basis.

Where a trader is authorised to account for VAT on the moneys received basis and, for a period of four consecutive months their turnover from taxable supplies to unregistered persons is less than 90% of total turnover, the trader must notify Revenue by the end of the following month and indicate the actual percentage of such supplies. If the change in the percentage is of a marginal or temporary nature, the authorisation may be allowed to continue.

Where a trader is authorised to operate the moneys received basis because their annual turnover is less than €2m that trader must apply to have that authorisation cancelled where it is clear that the turnover will exceed the limit in any continuous period of twelve months.

Where a trader fails to notify Revenue their authorisation will be deemed to have been automatically cancelled with effect from the start of the VAT accounting period within which the notification should have been made.

Cancellation of an authorisation will have effect from the start of the VAT accounting period during which the trader is notified of such cancellation by Revenue or from the start of a later VAT accounting period if specified in the notice.

Excluded Transactions

The following are excluded from the money received basis:

–          Transactions between connected persons.

–          VAT on property transactions consisting of the creation of long leases prior to 1 July 2008.

VAT on any of the above must be paid by reference to the normal invoice basis.

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