VAT Recoverability

[Numbers]

In the instance where a client is providing VATable and VAT exempt services, and they calculate their recoverability on purchases VAT based on Revenue, am I correct in presuming that the recoverability % is calculated on the actual/invoiced sales for the period rather than the cash receipts for the period ... basically invoiced Vs Cash basis

 

[Joe_90]

In principal yes based on sales.

Directly relatable expenses will be allowed in full or not at all with dual use allocated on the % basis.

An end of year review is also a good check. You would amazed how many clients have majority of 23% sales in a month of high purchase VAT.

 

[Numbers]

Yeah I know that Revenue allow for the apportionment of VAT recoverability to be based on Sales with other basis (floor space etc) allowable upon agreement with Revenue. So it is correct to assume then that the Sales % is calculated on the sales invoices for the period rather than the cash received in relation to sales for the period

 

[Joe_90]

Yes on sales invoices but that's not 100% as the sales and purchases may be in different periods so an end of year review is needed.

Alternatively you could look at the average % in prior periods.