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Here you can access relevant source documents which support the summaries of key tax developments in Ireland, the UK and internationally

Source documents include:

  • Chartered Accountants Ireland’s representations and submissions
  • published documents by the Irish Revenue, UK HMRC, EU Commission and OECD
  • other government documents

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VAT Rate Change – Budget 2009

Increase in the standard rate of VAT from 21% to 21.5% from 1 December, 2008

  • General
  • Which VAT rate must the trader apply? – general rule
  • The effect of the change of VAT rate on contracts with fixed interval payments
  • Invoices
  • Credit notes
  • Advance Payments received before 1 December 2008
  • Contracts existing on 1 December 2008
  • Continuous supplies of utilities
  • Budget account sales, hire-purchase sales and other credit sales
  • Stock on hands on 1 December 2008
  • Accounting for VAT
  • Further Information

1. General

1.1 The standard rate of VAT will be increased from 21% to 21.5% with effect from 1 December, 2008. This rate applies, for example, to supplies of motor vehicles, petrol, electrical supplies, furniture, carpets, adult footwear and clothing. The purpose of this leaflet is to outline the implications of the change for VAT-registered traders.

Note: Zero rated goods, such as basic foodstuffs, children's clothing and children's footwear and oral medicines, and goods and services subject to VAT at the 13.5% rate such as catering, new houses, construction services and solid fuel are not affected by the change.

2. Which VAT rate must the trader apply?– general rule

2.1 The general position is that traders accounting for VAT on the invoice basis should apply the rate of VAT in force at the time they issue or are obliged to issue a VAT invoice, whichever is the earlier. In the case of transactions with private individuals, a trader should apply the rate in force at the time of the supply.

2.2 Although traders who account for VAT on the cash basis are not liable for VAT on their supplies until they receive payment where they supply goods or services before 1 December 2008 but receive payment on or after 1 December 2008 they should account for VAT on those supplies at the 21% rate. Such traders should account for VAT at 21.5% on goods and services supplied on or after 1 December 2008.

3. The effect of the change of VAT rate on contracts with fixed interval payments

3.1 When payments for continuous supplies due at fixed intervals over an agreed time-frame become due before 1 December 2008, they may be treated as being taxable at the 21% rate of VAT if invoiced before 1 December 2008. This applies even if the interval over which the supplies take place spans the time both before and after that date. For example, rental of office equipment or a television for the interval from 1 October 2008 to 31 December 2008 may be treated as taxable entirely at 21% if the payment is due before 1 December 2008 and the invoice for that fixed payment is issued before that date. If such an invoice is issued on or after 1 December 2008, the rate is 21.5%.

4. Invoices

4.1 VAT invoices issued by a VAT-registered person (who is not on the cash basis) to another VAT-registered person on or after 1 December 2008 should show VAT at the 21.5% rate. This is so, even if the goods or services were supplied before that date. A supplementary VAT invoice issued in respect of an increase in the charge should accordingly show the rate applicable at the time of its issue.

4.2 A trader on the cash basis who is required to issue a VAT invoice to another VAT registered person should show the VAT rate which applies on the date of the supply, not on the date of receipt of payment. (see paragraph 2.2)

4.3 VAT liability in respect of goods or services supplied to an unregistered person is normally determined by the date of supply and not the date of issue of the invoice, if any. Goods or services which are actually supplied to unregistered persons prior to 1 December 2008 are taxable at the 21% rate even though they may be invoiced on or after 1 December.

4.4 For invoices relating to utilities please refer to paragraph 8.

5. Credit notes

5.1 Any VAT credit note or debit note relating to a supply of goods or services which contains a VAT adjustment and which is issued to a VAT-registered person, a Public Body or an exempt person on or after 1 December 2008 should show VAT at the rate in force at the time the original invoice was issued.

5.2 Any credit note or debit note relating to a supply of goods or services which is issued to an unregistered person on or after 1 December 2008 should show or include VAT at the rate in force at the time of the supply.

5.3 For credit notes relating to utilities, please refer to paragraph 8.

6. Advance Payments received before 1 December 2008

6.1 An advance payment, including a deposit, received from a VAT-registered person before 1 December 2008 in respect of goods or services not supplied until that date is subject to VAT at 21% if the invoice relating to that payment is issued or required to be issued before 1 December 2008. However, if the invoice relating to that payment is issued or required to be issued on or after 1 December 2008, the payment is taxable at 21.5%. In the case of traders accounting for VAT on the cash basis, an advance payment received before 1 December is taxable at 21%. Any advance payment received from an unregistered person is taxable at the 21% rate if received before 1 December 2008 and 21.5% if received on or after that date.

7. Contracts existing on 1 December 2008

7.1 Where a contract to supply goods or services is entered into before 1 December 2008 and the contract is not completed until after that date, then the agreed VAT inclusive price may be subject to an appropriate adjustment on account of the change in the VAT rate, unless there is agreement to the contrary between the contracting parties.

7.2 When, for example, a trader were to contract in October 2008 to make blinds for a house for €1,000 and the rate of VAT is increased with effect from 1 December 2008, then, in the absence of an agreement to the contrary, the trader can increase the agreed price to include the extra VAT, assuming the blinds have not been supplied or paid for before 1 December. The trader is, of course, liable to VAT at the increased rate on the supply.

8. Continuous supplies of utilities

8.1 In the case of continuous supplies of utilities (i.e. gas, electricity, telecommunications) to non-business and other unregistered customers the rate applicable is the rate in force at the time the bill issues to the consumer, provided that the company issues a bill at least every three months. Of those, the only continuous supplies chargeable at the standard rate are telecommunications supplies. (Supplies of gas and electricity, both subject to the 13.5% rate, so this change does not affect them.) The VAT rate applying to supplies to business customers is the rate applicable on the date of issue of the invoice or bill.

8.2 Telecommunications services billed before 1 December are taxable at 21% and telecommunications services billed on or after 1 December are taxable at 21.5%.

8.3 Any credit note or debit note covering a supply of telecommunications services which is issued to non-business or other unregistered customers after 1 December 2008 relating to a bill issued before 1 December 2008 should show the rate applicable on the date of issue of the bill itself, i.e. the 21% rate.

9. Budget account sales, hire-purchase sales and other credit sales

9.1 These sales are chargeable to VAT as follows –

  • at the rate in force at the time of the sale by the finance house, in the case of sales to unregistered persons, or
  • at the rate in force at the time of issue of the invoice by the finance house in the case of sales to VAT-registered traders.

10. Stock on hands on 1 December 2008

10.1 Persons who are registered for VAT on 1 December 2008 should account for VAT at the 21.5% rate on stock supplied after that date even though they may have purchased their stock with VAT at the 21% rate before that date. Such persons will already have been entitled to a credit for VAT on the purchase of that stock, subject to the usual conditions.

11. Accounting for VAT

11.1 Traders should bear in mind when completing their VAT return for the November/December 2008 taxable period that they must account for VAT at the rates appropriate to the particular months.

11.2 When completing the Return of Trading Details for the year the same row should be used for both the old and the new rates.

12. Further Information

12.1 Enquiries regarding any issue contained in this information leaflet should be addressed to the Revenue District responsible for the taxpayer's affairs. Contact details for all Revenue Districts.

12.2 This information leaflet is a non-statutory guidance note aimed at informing traders about straightforward scenarios. It cannot be relied on by businesses where an interpretation put on this leaflet could have an unintended effect.

VAT Appeals and Communications Branch

New Stamping Building

Dublin Castle

October, 2008