Ten Irish Tax Tips on Value Added Tax (VAT) That You Can Follow To Get it Right and Save Money For Your business!
There are many aspects to VAT law, and depending on what industry you operate in and the locations, it can be a easy to make mistakes in administering VAT within your business. Some regular and expert oversight is needed to ensure accurate and complete claims are made and therefore ensuring valid VAT claims are made to save you money.
- Registering for VAT when you have a justifiable case for doing so - unless you have a VAT establishment in Ireland then a VAT application is futile and taking advice on this before applying and planning ahead for the structure of your business is absolutely necessary.
- Registering for VAT when appropriate, obligatory or voluntarily - Irish law has prescribed obligatory legal definitions of when VAT registration is necessary and there is no choice on the matter, you have to register for and account for VAT in the circumstances unless of course you are considering a voluntary registration application.
- Claiming VAT on valid supplier invoices - the supplier invoice should state a number of key fields to qualify as a VAT invoice and these need to be carefully reviewed before making a VAT claim. The correct name of your entity is one area that often is incorrect and leads to a disallowed VAT claim by Revenue.
- Claiming VAT on ALL valid supplier invoices -in the consulting business for example, where many consultants spend much of their time travelling to client sites and do not therefore maintain a significant office base , save for a one room home office , there are often not that many expenses that you can reclaim VAT on, aside from accountants fees , of course and some general overheads!
- Charging VAT at the correct rate on sales - for example the food industry has for a long time been the subject of uncertainty over the definition of food (which is vatable at 0%) versus food supplements (which is vatable at 13.5/23%). The Definition of what a food supplement consists of is not clear under Irish law so the potential for misinterpretation is very high. Recently a new 21% VAT rate has been introduced on a temporary basis under covid19 measures so you will have needed to make changes to your accounting systems to accommodate this.
- Accounting for Intra EU transactions & non- EU transactions correctly - this has always been an area for error or omission so care is needed to identify your non-domestic transactions to ensure they are correctly treated. This area will become much more important as Brexit kicks in from 01st January as the level of Irish trade with the UK is very significant. You will need to familiarise yourself with these changes now to ensure the transition is as smooth as possible and avoid any costly and unnecessary disruption to your business.
- Use cash accounting for VAT to your advantage - cash accounting is a vital measure to aid SME's cashflow. You only pay VAT on your sales when the sale has been paid and you have received the VAT from your customer. It applies to businesses with sales of under € 2million per annum.
- File your VAT returns on time -file on time and avoid the risk of Revenue enquiries, audits , penalties or interest being applied.
- Register for and file EU returns, especially if you are selling services to the EU via VIES reporting - this is often missed when you have EU business until it is noticed that you have been reporting EU transactions on your regular VAT return!
- Non-Domestic Supplies of Goods or Services to your business- ensure you correctly account for goods or services bought from outside of Ireland as these are often required to be self- accounted for i.e. the reverse charge VAT process applies and this requires a specific method of accounting and presentation on your VAT return.
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