How to get VAT Registered and what to consider. Should I be VAT registered?
New VAT changes
A reduction in the frequency of tax returns and payments for smaller businesses was introduced during 2006 and 2007. These simplified arrangements are being further extended to include newly eligible customers from 1 January 2010.
Businesses making total annual VAT payments of less than €3,000 became eligible to file VAT returns and make their payments on a 6 monthly basis; and
Businesses making total annual VAT payments of between €3,000 and €14,400 became eligible to file VAT returns and make their payments on a 4 monthly basis.
A further factor for setting your return frequency will be your past compliance record with Revenue.
Can I register voluntarily for VAT ?
A trader is generally required to register for VAT for making supplies of goods and/or services, subject to his or her turnover exceeding certain thresholds. The most common are €37,500 for the supply of services, and €75,000 for the supply of goods. Some traders are generally not required to register for VAT, although they may choose to do so. These include traders whose turnover does not exceed the thresholds above, and also farmers. Traders engaged in exempt activities are not permitted to charge VAT. However, they may, in common with farmers, Government Departments and other bodies be required to register for VAT, in order to account for VAT on services or goods received from suppliers outside Ireland.
What is the turnover threshold for VAT registration?
The principal thresholds applicable are as follows:
(a) €37,500 in the case of persons supplying services
(b) €37,500 for persons supplying goods liable at the reduced or standard rates which they have manufactured or produced from zero rated materials
(c) €37,500 for persons making mail-order or distance sales into the State
(d) €41,000 for persons making intra-Community acquisitions
(e) €75,000 for persons supplying goods
(f) €75,000 for persons supplying both goods and services where 90% or more of the turnover is derived from supplies of goods (other than of the kind referred to at (b) above.
A non-established person supplying taxable goods or services in the State is obliged to register and account for VAT irrespective of the level of turnover.
A taxable person established in the State is not required to register for VAT if his or her turnover does not reach the appropriate threshold above. However, they may opt to register for VAT
What is the Cash Basis for accounting for VAT?
Under the normal Invoice Basis for accounting, a trader is liable to account for VAT when an invoice is issued to a customer. Under the Cash Basis (also called the Receipts or Moneys Received Basis) of accounting, a trader is liable to account for VAT when payment is actually received.
A trader must fulfill one of two criteria to be on the Cash Basis. Either;
1. Annual turnover does not exceed one million €; or
2. Supplies are almost exclusively (at least 90%) made to customers who are not registered for VAT, or are not entitled to claim a full deduction of VAT
In practice, the Cash Basis of accounting is mainly used by shops, restaurants, public houses and similar businesses, and by any other person making supplies of goods or services directly to the public.
It is important to note the following points:
- A person on the Cash Basis is nonetheless required to issue a VAT invoice when a customer is registered for VAT
- The cash basis cannot be used where the trader and the customer are connected parties
- The cash basis cannot be used for construction services supplied by a sub-contractor to a principal contractor
- In the event of a change in the rates of VAT, a business operating on the Cash Basis must apply the VAT rate by reference to the time that the goods or services were actually supplied, and not the time that the payment was received (if this is later).
A person or business applying for VAT registration who wishes to use the Cash Basis rather than the Invoice Basis must also apply at the time of registration in writing for permission. Alternatively, application may be made to the local Revenue District subsequently, again in writing, to change from the Invoice Basis to the Cash Basis.