As you are aware many
businesses, whether carried on as a sole trader or a company, are obliged to
register for VAT. Common reasons a business
is obliged to register for VAT include the following:
- The business is a taxable person i.e. it engages
in the supply within the State of taxable goods or services in the course
or furtherance of a business.
- The business makes intra Community acquisitions
- The business receives fourth schedule services
(for business purposes) from abroad.
Fourth schedule services include consultancy services provided by
accountants, lawyers, consultants and engineers. All persons, other than private
individuals, who receive fourth schedule services from abroad (for business
purposes), must self account for the Irish VAT and must therefore be
registered for VAT regardless.
- The business is involved in property transactions
within the State and needs to register for VAT as a result of same.
While in principle,
anyone that supplies goods or services within the State is a taxable person, the
legislation provides that certain persons whose turnover does not exceed
specified limits are not regarded as
being taxable persons. A business whose
turnover, in any twelve month period, does not exceed or is not likely to
exceed €37,500 (in the case of supply of services) or €75,000 (in the case of
supply of goods) is not deemed a taxable person and therefore not obliged to
A business that does
not, nor is likely to, exceed the relevant limit may still elect to register
for VAT. The trader will be obliged to
charge and account for VAT on sales but will have the advantage of being able
to claim for VAT inputs.
A trader who has elected to register for VAT may cancel
his / her registration by arrangement with the relevant Revenue District. It is
a condition of such election that he / she pays to Revenue any excess of VAT
refunded to him / her over the tax paid for the taxable periods during which
the election had effect or 3 years prior to the date of application for
cancellation whichever is lesser. If
a trader falls below the turnover threshold he / she may also deregister for
VAT and a clawback will not occur if the deregistration was not on foot of an
election to register.
It is important to
note that a trader may fall below the turnover threshold yet still be obliged
to be VAT registered e.g. the trader in question receives fourth schedule
services. It is also important to note
that a deregistered trader must constantly analyse his / her turnover and
monitor whether or not it is necessary to register for VAT again.