Accounting for VAT on moneys received

Who may opt for the moneys received basis?

You may apply to account for Value-Added Tax (VAT) in this way if you meet one of these conditions:

  • A VAT-registered person whose turnover does not exceed or is not likely to exceed €2,000,000 in any continuous period of 12 months.
  • A VAT-registered person whose supplies are almost exclusively (at least 90%) made to customers who are not registered for VAT, or not entitled to claim a full deduction of VAT.

In practice this second condition would apply mainly to sales by retails outlets, public houses, restaurants and any similar type of business selling mainly to private individuals.

What is the moneys received basis?

Under the normal basis for accounting, a trader is liable to account for VAT when:

  • the supply is made
  • or
  • where appropriate, an invoice is issued to a customer.

Under the moneys received basis of accounting a trader is liable to account for VAT when payment is actually received.

If you are using the moneys received basis for VAT the normal invoicing requirements still apply.

When can you not use the moneys received basis?

The moneys received basis cannot be used for VAT in respect of the following transactions:

  • transactions with a connected person
  • construction services supplied by a sub-contractor to a principal contractor
  • VAT on property transactions consisting of the creation of long leases prior to 01/07/2008 must always be accounted for on the invoice basis.

Next: How do you apply for the moneys received basis?