VAT Accounting FAQs
- How do I complete a VAT3 Return Form?
- What is the Cash Basis of accounting for VAT?
- I am accounting on the Invoice Basis for VAT. Can I change to the Cash (Receipts/Moneys Received) Basis?
- Accounting for VAT Chapter 11 of the VAT Guide 2008
The VAT3 Return (sample copy (PDF, 114KB)) records the total value of transactions carried on by you in the course of a two-month tax period. This form will be sent to you by the Office of the Colletor-General, and must be returned completed by the due date indicated on the form or accompanying letter.
The figures representing the transactions carried out by you should be recorded in the boxes on the form, as follows:
- T1 Box – VAT on Sales: This figure is the total VAT charged by you on sales to customers in the taxable period.
- T2 – VAT on Purchases: This figure is the total VAT incurred by you on purchases of goods for resale (if any); and on expenses incurred for business purposes in the taxable period.
- T3 – VAT payable: Where the figure in T1 is greater than that in T2, then you have a net liability to Revenue, which is calculated by subtracting T2 from T1.
- T4 – VAT repayable: Where the figure in T2 is greater than that in T1, then you have an entitlement to get a net refund of VAT, which is calculated by subtracting T1 from T2.
If no VATable transactions have been carried out in the tax period, the VAT3 must be returned marked zero at T1, T2 T3 and T4. N.B.: Do not write 'nil' on any line!
Where you have made supplies of goods to customers in other E.U. countries, or purchased goods from suppliers in other E.U. countries, this must be reflected in the VAT3 as follows:
- E1 – Intra-E.U. supplies of goods: This is the total Value (not just the VAT element) of goods sold to customers in other EU countries
- E2 – Intra-E.U. acquisitions of goods: This is the total Value (not just the VAT element) of goods purchased from suppliers in other EU countries.
Where you have supplied services to customers in other E.U. countries, or received services from suppliers in other E.U. countries, this must be reflected in the VAT3 as follows:
- ES1 – Intra-E.U. supply of service: This is the total Value (not just the VAT element) of services supplied to customers in other EU countries
- ES2 – Intra-E.U. acquisition of services: This is the total Value (not just the VAT element) of services received from suppliers in other EU countries.
Full details on how to complete the VAT3, and other forms such as the annual Return of Trading Details (sample copy (PDF, 900KB)), are contained in the Revenue Guide to VAT for Small Businesses (PDF, 402KB).
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
- Annual turnover does not exceed one million €; or
- 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.
Further details are available in the information leaflet on the Moneys Received Basis of Accounting.
You may opt to account for VAT on a Cash Basis if
- Your annual turnover does not exceed one million €; 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 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.
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 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.