What is the cash receipts basis of accounting for VAT?

You account for VAT when your customer pays you rather than when you issue the invoice. An unpaid invoice creates no VAT liability until the money arrives.

Who can use the cash receipts basis in Ireland?

Broadly, a business whose annual turnover does not exceed EUR 2 million, or one where at least 90% of supplies go to customers not registered for VAT. You apply to Revenue for it rather than simply choosing it.

Does the cash receipts basis change what my customer sees?

No. The invoice is identical either way - same rate, same VAT amount, same wording. The basis decides when you hand the VAT to Revenue, not what you charge.

The cash receipts basis: paying VAT when you are paid

Q: Can I still reclaim VAT on my purchases?

Yes, and this is the asymmetry worth knowing: on the cash receipts basis you account for VAT on sales when paid, but generally still reclaim VAT on purchases on the invoice basis. The timing runs your way on both sides.

If your customers pay in sixty days and your VAT3 is due in nineteen, you have been lending Revenue money you do not have.

Last reviewed 1 September 2026

Two ways to answer “when do I owe Revenue this VAT?”

Basis	VAT falls due	An unpaid invoice
Invoice (the default)	When you raise the invoice	You owe the VAT anyway
Cash receipts	When the customer pays	Owes nothing yet

Why it matters more than it sounds

On the invoice basis a €10,000 invoice at 23% puts €2,300 on your VAT3 the moment you send it. If the customer pays in sixty days and the return is due in nineteen, you pay Revenue out of your own working capital and wait to be reimbursed by a customer who has no idea they have borrowed from you.

For a business with slow payers this is not a rounding difference. It is the largest cash-flow decision available at registration, and it is made once, quietly, on a form.

Who qualifies

Broadly, either of:

Turnover not exceeding €2 million in any continuous twelve months, or
At least 90% of supplies going to customers not registered for VAT — the usual position for a trade working for households.

You apply to Revenue for it; it is not a box you tick for yourself. If turnover later passes the limit you move back to the invoice basis, and that transition has its own rules about invoices already issued.

The asymmetry in your favour

On the cash receipts basis you account for VAT on sales when paid — but generally still reclaim VAT on purchases on the invoice basis, when the supplier’s invoice arrives. The timing runs your way on both sides of the return. That is deliberate, and it is part of why the basis exists.

What does not change

The invoice. Same rate, same VAT amount, same wording, same everything the customer sees. Which is why a customer can never tell which basis you are on — and why nothing about your invoicing needs to look different.

What does change is how the VAT3 is built. On the invoice basis, T1 comes from invoices issued in the period. On the cash receipts basis it comes from payments received in it. The same month’s trading produces two different numbers, and a system that cannot report both cannot check itself.

Deposits move differently on the two bases. A deposit is a payment, so on the cash receipts basis it carries VAT when it lands, whether or not the job has been done. The two cases are here.

Plain-English summary, not tax advice. Revenue’s guidance on accounting for VAT is the authority, and the qualifying limits change.

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