VAT jargon buster: Key phrases for your business to know

There’s often a lot of jargon used when talking about Value Added Tax (VAT), so it’s important to understand as much of it as possible.

To help you translate the complex language, we’ve identified the most commonly used terms and provided some plain English definitions in this VAT jargon buster. Hopefully you’ll find them helpful.

Accounting or tax period

This is the period of time reported in your VAT return; usually three months.

Acquisitions

Goods brought into Ireland from other European Union (EU) countries. This is different from goods brought into Ireland from outside of the EU, which are known as imports.

Corporate body

An incorporated body. For example, a limited company, limited liability partnership, friendly, industrial or provident society.

Distance sales

This is when a business in one EU country sells and ships goods directly to consumers in another EU country. For example, internet sales.

Exports

Goods sent to countries outside of the EU.

Dispatches

Goods sent to another EU country.

Imports

Goods brought into the EU from countries outside of the EU.

Input tax

The VAT you pay on purchases, whether supplies, products, goods or services used when running your business. Goods coming in, therefore input VAT.

Read more about VAT

• Accounting for VAT on a cash received basis
• When to submit your VAT return
• How to account for VAT when buying from abroad
• Understanding if you need to register for VAT and how to do it

---

Non-compliance

Revenue has broad ranging powers and will enforce them if you are not compliant. Penalties are normally a percentage of underpaid VAT and can range depending on the case.

There are also fixed penalties for infractions, including but not limited to: 

• Failure to register for VAT on time
• Failure to submit VAT returns on time
• Failure to keep proper books and records
• Failure to comply with invoicing requirements
• Failure to charge VAT correctly

Non-deductible items

If Revenue requests copies of purchase invoices, you must comply. The following are some examples of expenses that are not allowed to be reclaimed, even if the expense relates to the business:

• Expenditure incurred on food and drink, or personal or entertainment services
• Expenditure incurred on accommodation other than qualifying accommodation in connection with attendance at a qualifying conference
• Purchase, hire, intra-community acquisition or importation of passenger cars or other vehicles
• Purchase, intra-community acquisition or importation of petrol (other than as stock-in-trade)

Output tax

The VAT you charge on sales which your clients pay you. Goods going out, therefore output VAT.

Partial exemption

Where a business incurs input tax on both taxable and exempt activities, it is partially exempt and will probably have to carry out calculations to split the VAT incurred on expenditure between what can and cannot be claimed.

Place of supply

The country in which the supply of goods or services must be accounted.

Prepare and file VAT returns

Revenue has set no requirement to submit supporting invoices with VAT returns. However, you can expect queries regarding submissions without invoices attached. 

• Respond to queries from Revenue as soon as you can
• Check every supplier’s invoice to ensure it’s valid
• Retain your VAT records for the required time period of six years
• Make sure you charge the right rate of VAT on your products

Records

Taxpayers are required by law to keep full and true records of all transactions that may affect their liability to tax or entitlement. This includes all documents issued or received:

• Books
• Invoices
• Credit notes
• Receipts
• Bank statements
• And all other documentation that relates to the purchase or supply of goods or services.

This documentation should be kept on file for six years from the date of the latest transaction to which the records relate, and should be updated regularly.

If you do not have a system in place, make sure you consult your accountant or tax adviser as soon as possible to agree on an appropriate system for the ongoing management of these documents to ensure revenue compliance.