{"id":16305,"date":"2017-10-17T12:06:49","date_gmt":"2017-10-17T11:06:49","guid":{"rendered":"https:\/\/bigredcloud.com\/?p=16305"},"modified":"2022-03-24T11:58:39","modified_gmt":"2022-03-24T11:58:39","slug":"cash-receipt-accounting-vat","status":"publish","type":"post","link":"https:\/\/bigredcloud.com\/en\/cash-receipt-accounting-vat\/","title":{"rendered":"Cash Receipt Accounting for VAT"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Have you thought about using cash receipt accounting for VAT for your business? This is where a business pays tax based on cash payments received rather than on invoices sent and received. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">Cash accounting can work well for cash businesses selling to private people. Businesses like restaurants, retail stores and pubs supplying the public may be eligible if they meet the criteria. \u00a0<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Are you eligible for cash accounting?<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">To be eligible to apply to use cash accounting you must either be a:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">VAT-registered person with a turnover of no more than or is not likely to be more than \u20ac2 million in any continuous 12-month period.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">VAT-registered person where 90 percent of the customers supplied are not registered or entitled to claim the full VAT. <\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">You cannot use cash receipts accounting for:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Transactions between related parties<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Subcontractors supplying construction services to the principal contractor<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Long property leases in place before July 1, 2008.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">(source <\/span><a href=\"https:\/\/www.revenue.ie\/en\/vat\/accounting-for-vat\/accounting-for-vat-on-moneys-received\/who-can-opt-for-the-moneys-received-basis.aspx\"><span style=\"font-weight: 400;\">Revenue Ireland<\/span><\/a><span style=\"font-weight: 400;\">)<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Applying to use cash accounting<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">When you apply to register for VAT the first time, you have to tick the method of accounting for VAT on the registration form. Tick the box for cash accounting if you meet the conditions of supply. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">If already registered for VAT, apply to your local tax office to change your accounting method. You will need to supply the following information:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">VAT registration number<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">What your business does (retail shop, restaurant)<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The percentage of your taxable turnover from sales to unregistered people for:<\/span>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The 12 months that ended on the last day of the taxable period before the application, or<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">From when the business began trading to the last day of the taxable period before the application.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">An estimated percentage of your taxable turnover from sales to unregistered people for the tax period the application applies to<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Your current annual turnover if it is under \u20ac2 million.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">When you receive authorisation, it applies from the start of the tax period unless otherwise specified. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">(source <\/span><a href=\"https:\/\/www.revenue.ie\/en\/vat\/accounting-for-vat\/accounting-for-vat-on-moneys-received\/who-can-opt-for-the-moneys-received-basis.aspx\"><span style=\"font-weight: 400;\">Revenue Ireland<\/span><\/a><span style=\"font-weight: 400;\">)<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Keep in mind<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Keep the following things in mind when using cash receipt accounting:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">You cannot use it for transactions between related parties. You must always invoice these sales. <\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Contact Revenue if your business will turnover more \u20ac2 million in any continuous 12-month taxable period. You need to cancel the cash accounting authorisation.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Notify Revenue if your taxable turnover from sales to unregistered people drops below 90 percent for more than 4 months in a row.<\/span><\/li>\n<\/ul>\n<h2><span style=\"font-weight: 400;\">Cash payment benefits<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Cash receipt accounting for VAT frees up cash flow. You do not have to pay VAT until the business receives payment. This means you do not have to carry the VAT portion of your debtors until they pay. Also, you do not have to pay VAT on bad debts.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The VAT rate can change. You only pay the VAT rate payable at the time of the sale and not when you receive payment if the rate changes in that time. <\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Keeping records<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">You must still keep records. And, the same requirements apply to invoices even when using the cash accounting method. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">How do you track your sales and supplier invoices? By hand using a cashbook or online using <\/span><a href=\"https:\/\/bigredcloud.com\/freetrial\/\"><span style=\"font-weight: 400;\">software<\/span><\/a><span style=\"font-weight: 400;\"> that makes tracking VAT payments and invoices simple? Is it time to review the way you deal with accounting for VAT? <\/span><\/p>\n<p><span style=\"font-weight: 400;\">Make sure you choose the best method for VAT accounting for your business. You can change your method of accounting, but you need to apply to the tax office for authorisation.<\/span><\/p>\n<p>N.B. Not all Accounting Software caters for Vat on a cash receipts basis, so be careful to select the right package.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Have you thought about using cash receipt accounting for VAT for your business? This is where a business pays tax&#8230;<\/p>\n","protected":false},"author":6,"featured_media":16986,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[69,66],"tags":[],"class_list":{"0":"post-16305","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-accounting","8":"category-advice"},"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.3 (Yoast SEO v27.8) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Cash Receipt Accounting for VAT - Big Red Cloud<\/title>\n<meta name=\"description\" content=\"In our most recent blog post, we discuss the benefits of using cash receipt accounting for VAT for your business. 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