Dáil Éireann Debate, Tuesday - 21 May 2013
118. Deputy Peadar Tóibín asked the Minister for Finance if he will re-examine the €1.25 million VAT cash receipts accounting threshold in view of the small number of companies that can benefit from the change in budget 2013. [23948/13]
View answerVAT is normally accounted for on the basis of invoices issued, that is VAT is payable on the total sales invoiced in the relevant period, regardless of whether or not the trader has been paid for the supply in that period. However, the cash basis of accounting provides traders with the option to account for VAT on a cash receipts basis. This means that the trader is not required to pay VAT until payment for the supply is actually received. Availing of this option assists firms in the critical area of cash flow. In order to avail of the cash receipts basis of accounting for VAT, a business must either a) be supplying goods or services, where 90% of the supplies are to persons who aren’t registered for VAT or b) have an annual turnover which is less than €1.25 million.
As part of a number of measures to assist small to medium enterprises, Budget 2013 increased this turnover threshold from €1 million to €1.25 million with effect from 1 May 2013. This increase will have a once off cost to the Exchequer of €20 million. Over 800 businesses are expected to benefit from this change.
Although it is possible to increase the threshold to a level higher than €1.25 million, the cash basis cannot be used to replace the normal VAT arrangements across the board which might be the case if an excessively high threshold were used, given 66% of taxpayers are already using the cash basis system. In addition an increase in the threshold to €2 million or €2.5 million would be very costly to the Exchequer. Increasing the threshold to €2.5 million, for example, would cost the Exchequer €150 million. Accordingly, I have no plans to further increase the threshold at this time.
