{"id":20,"date":"2018-10-15T08:04:08","date_gmt":"2018-10-15T07:04:08","guid":{"rendered":"https:\/\/www.sage.com\/en-ie\/blog\/?p=20"},"modified":"2026-01-09T15:14:44","modified_gmt":"2026-01-09T15:14:44","slug":"accounting-for-vat-on-a-cash-received-basis","status":"publish","type":"post","link":"https:\/\/www.sage.com\/en-ie\/blog\/accounting-for-vat-on-a-cash-received-basis\/","title":{"rendered":"Accounting for VAT on a cash received basis"},"content":{"rendered":"
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\n\t\t\t\t\t\t\tMoney Matters<\/a>\t\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t
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\n\t\t\t\t\t\tAccounting for VAT on a cash received basis\t\t\t\t\t<\/h1>\n\t\t\t\t<\/div>\n\n\t\t\t\t\t\t\t\t\t

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\n\t\t\t\n\t\t\t\t\"Tracey\t\t\t\tTracey Glacken<\/span>\n\t\t\t<\/a>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n<\/div>\n\n\n\n\n\n

VAT registered traders can opt to account for VAT by using one of two methods: invoice basis or cash received basis (also known as money received basis or VAT cash accounting).<\/p>\n\n\n\n

This article discusses the use of the cash received basis and how it works.<\/p>\n\n\n\n

Cash received basis background<\/strong><\/h2>\n\n\n\n

If your business has a turnover of less than \u20ac2 million in any continuous period of 12 months then you can opt for the cash received basis<\/mark>. Any business with a turnover of greater than \u20ac2 million must register for the invoice basis method of accounting.<\/p>\n\n\n\n

Also, if you provide the majority of services or goods (at least 90%) to customers not registered for VAT, you can opt for the cash received basis. This applies mainly to retailers, hairdressers, beauticians, restaurants and other similar types of businesses.<\/p>\n\n\n\n

How the ca<\/strong>sh received basis <\/strong>works<\/strong><\/h2>\n\n\n\n

Under the cash received basis a trader issues an invoice to a customer in the usual way. When payment is received for this invoice the VAT is accounted for on the traders VAT return.<\/p>\n\n\n\n

For example, Business X issues an invoice on 12 June for \u20ac1,000 plus VAT of \u20ac230. On 12 August, Business X receives payment in full for this invoice. Business X will account for VAT in the amount of \u20ac230 on their July\/August VAT return.<\/p>\n\n\n\n

If a discount or reduction in price is allowed subsequent to the issue of the invoice then the trader must issue a credit note to a VAT registered customer showing VAT.<\/p>\n\n\n\n

This will have no effect on the liability of the trader as the VAT will be accounted for on the amount received rather than the original invoice.<\/p>\n\n\n\n

The effect of the credit note is to reduce the VAT deduction allowed to the customer.<\/p>\n\n\n\n

Read more about VAT<\/strong><\/p>\n\n\n\n