There were two VAT changes introduced in the budget by the Minister for Finance on 11th December 2009. Firstly, the standard rate of VAT was reduced to 21%, reverting back to the rate which applied pre 1 December 2008. A change in the VAT rate gives rise to procedural issues in relation to invoices and credit notes and a summary of the key points in Revenue’s Guide is provided below. Secondly, changes to the special scheme for means of transport were introduced by way of a Financial Resolution (No. 4). The supply of second hand means of transport/agricultural machinery by taxable dealers will for a transitional period (1 January to 30 June 2010) come within the scope of the margin scheme for second hand (as opposed to the current special scheme applicable). Under the new measures taxable dealers will be entitled to restricted relief on residual VAT on the purchase or acquisition of second hand means of transport/agricultural machinery. The relief will be available on a sliding scale basis (40% in VAT period Jan/Feb 2010, 30% in VAT period Mar/Apr 2010 and 20% in VAT period May/Jun 2010).
Decrease in the standard VAT rate from 1 January 2010
The standard VAT rate is set to decrease from 21.5% to 21% on 1 January 2010.
Which VAT rate to apply?
Ø If a supplier accounts for VAT on the cash-receipts basis, then the VAT rate applicable is the rate in force at the time of the supply.
Ø For suppliers accounting for VAT on the invoice basis, the VAT rate applicable will depend on whether or not the supplier is obliged to issue a VAT invoice.
Ø Suppliers who are obliged to issue a VAT invoice must apply the VAT rate applicable at the time the VAT invoice issues or is required to issue.
Ø Suppliers who are not obliged to issue a VAT invoice (usually because they are dealing with unregistered persons) must apply the VAT rate in force at the time of the supply.
Invoices
If a VAT invoice issues from one VAT-registered person to another VAT-registered person on or after 1 January 2010 and the standard rate applies, then the invoice should show VAT at 21%.
If goods or services are supplied at the standard rate to unregistered persons prior to 1 January 2010, the rate applicable will be 21.5% even if an invoice is issued on or after that date.
Credit notes
A credit note issued to a VAT-registered person, a public body or an exempt person on or after 1 January 2010 should show or include VAT at the rate in force at the time the original invoice issued. A credit note issued to an unregistered person on or after 1 January 2010 should show or include VAT at the rate in force at the time of the original supply.
Advance payments
If a VAT-registered person who accounts for VAT on the invoice basis receives a payment or deposit before 1 January 2010 and the corresponding goods/services are not supplied until on or after 1 January 2010, then the supplier must account for VAT at 21.5% if this was the rate in force on the date on which the VAT invoice issued or should have issued.
If a VAT-registered person who accounts for VAT on the cash receipts basis receives a payment or deposit before 1 January 2010 and the corresponding goods/services are not supplied until on or after 1 January 2010, then the supplier must account for VAT at 21.5%, on the basis that this was the rate in force at the time of the advance payment.
Contracts already in existence at 1 January 2010
VAT is generally due at the time of supply or at the time when the corresponding VAT invoice issues or is required to issue. Consequently if a contract was signed pre 1 January 2010 and the contracted supply takes place post 1 January 2010, then the agreed price is in general terms subject to an appropriate adjustment for the new VAT rate.
Utilities
The rate change will affect in particular continuous supplies of telecommunications services e.g. telephone and television. In general terms the rate applicable will be the rate in force on the billing date.
Stock on hand on 1 January 2010
VAT-registered traders are required to account for VAT at the new rate in the circumstances outlined even though they may have purchased stock at the old rate.
Gabrielle Dillon
Dermot O’ Brien & Associates
