Dáil Éireann Debate, Wednesday - 6 June 2012
81 Deputy Eoghan Murphy asked the Minister for Finance his views on whether the cash accounting scheme as it exists in Ireland, with a condition that businesses have an annual turnover of no more than €1 million to qualify, is too restrictive; and if he will consider the extension of the scheme to businesses with a turnover of less than €2.5 million, as recommended by the Dublin Chamber of Commerce. [26677/12]
Amharc ar fhreagraI would point out that VAT is normally accounted for on the basis of invoices issued, i.e. 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 million. The annual turnover threshold for eligibility for the cash basis of accounting is €1 million and has been effective since 1 March 2007. Although it is possible under EU VAT law to increase the threshold, the cash basis can only be used for "certain transactions or certain categories of taxable persons". It cannot be used to replace the normal VAT arrangements across the board. In addition, increasing the cash basis threshold from €1 million to €2.5 million would be very costly to the Exchequer, costing in excess of €150 million in the year of introduction.
