Insights From the FMco Team

Changing to a Cash Receipts basis for VAT

In practice, the Cash Basis of accounting is mainly used by shops, restaurants, public houses and similar businesses, and by any other person, such as a solicitor making supplies of goods or services directly to the public. Businesses who charge VAT under the margin scheme may also opt for the cash receipts basis irrespective of turnover as VAT charged by you under this scheme are not allowable as VAT inputs by the purchaser.

You may opt to account for VAT on a Cash Basis if;

  • Your annual turnover does not exceed €1million, or
  • Your 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 order to change from the Invoice Basis of accounting to the Cash Basis (or vice versa) you must apply in writing to your local Revenue District confirming that you meet either of the above conditions. If you are found to be eligible for the Cash Basis you will be notified of the date from which your accounting procedures have changed. You will be liable to account for VAT on all cash received on and after the approved date of change, but you will not have to account for sales for which you had already accounted while on the Invoice Basis.

The cash flow benefits of changing over to a Cash Receipts basis are considerable, and the additional administration required post change-over is outweighed by this benefit. Your accountancy package can also be altered to allow for the change.

Request a Callback

Let us know the best daytime telephone number to reach you and we’ll be in touch.