My summary of this initiative: Easier for subbies (sort of), a pain in the arse for main contractors. Yet another example of getting principal contractors to handle onerous admin issues so the Revenue doesn’t have to chase down subbies for money. I think this is unfair as there are lots of small building contractors without the resources to handle this stuff and its unfair that they be penalised.

But all puffing and blowing aside, here is what it means to those affected:

The actual revenue guides are here, and in fairness they did try to make the literature straightforward with pics and checklists and everything.
New VAT rules for Principal Contractors and Sub-contractors 

“I am a subbie, what does it mean to me?”
Well, when invoicing your principal contractor customers, you need to remove the vat rate and amount from your invoice and add the statement “VAT on this supply to be accounted for by the principal contractor” (If you are a SortMyBooks customer on support, this special format invoice will be available to you, we will let you know when you can download the patch.)
You still continue to collect VAT from any customer who is not a principal contractor, and return it in the normal way.
This might mean a smaller vat payment for you, or even that you will get a refund every two months, because it does not affect your right to reclaim VAT on business purchases. If you are paying your VAT by regular direct debit, you might want to reduce it.
 
Two Thirds rule 

The literature says “The two-thirds rule does not apply where the reverse charge applies.” I asked for an explanation, and my understanding is this:
If you are selling goods only with no element of labour involved, then you send a 21% invoice. But if there is some element of labour, even if only 10%, then you can do the special reverse charge invoice with no VAT. I can see this being open to abuse, and I pointed that out, but they don’t seem to mind.

“I am a long suffering principal contractor, what does it mean to me?”

1. VAT changes
Your subbies will be giving you an invoice with no VAT rate or amount on it and this statement: “VAT on this supply to be accounted for by the principal contractor” You need to process this invoice in a similar way to UK purchases - calculate the VAT that you would have been charged if you weren’t a principal contractor, and add it to both your T1 box and your T2 box. The net effect to you is zero. It’s a reporting thing. So if your subbie used to charge you €1,135 (1,000 + 13.5% VAT) he will now charge you €1,000. You pay no VAT and reclaim no VAT but you need to fill the pretend amount (€135 in this case) onto your VAT return, as I said, on both the T1 and the T2 boxes. (If you are a SortMyBooks customer on support, this is taken care of for you, we will let you know when you can download the patch.) If you are on direct debit for  payment of VAT, you might want to look at it because you will not be claiming back as much VAT. (cause you didn’t pay it out to the subbies to begin with)

2.RCT changes
There is not really a change here, it’s just that if you have to withold 35% from a subbie, you can go ahead and calculate it on the actual amount your were billed, so now, instead of 35% of 1135, you will be withholding 35% of 1000. Do you see?
 

Everyone - Annual Return of Trading Details
“And what happens with the ROTD form?” I asked. “I don’t think that’s been thought through…” replied the Revenue source, “but I will find out and get back to you.” You will know when I do so watch this space… (22 August, still no word, I wait…)

Note: If you were thinking of trying out SortMyBooks, the trial download version will also be updated with the new process. The guys and girls on the support line are happy to answer your questions too!

Hope this helps!
 

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Remeber when you got that letter saying you don’t have to do your VAT for six months at a time? Wasn’t that nice? How nice is it now? You know, they meant well when they brought in the less frequent VAT returns. It was with view to ‘reducing the administrative burden on small businesses’, straight out of the Small Business Forum Report . Unfortunately, it amounts to giving someone enough rope to hang themselves with. But all is not lost. If you have a mega pile of paperwork to be miraculously turned into a VAT return by July 19th, do not panic. Here’s how to get it done free with a 30-day trial of SortMyBooks, with enough time over to give yourself a mini finanical review:

The important boxes on the VAT return are the T1 box which is the sum total of all your sales VAT, and the T2 box, the sum total of all your purchases VAT. So you need to find where are your last six months of sales at and where are your purchase receipts/invoices  from the last six months.

Purchases 

The purchases side is easy, gather all the bits of paper, including purchases invoices you haven’t yet paid for, and sort them roughly by date. By month is fine, they don’t have to be in exact chronological order. Now, I mean everything remotely related to your business. Don’t forget the receipt for ink cartridges for the printer. The envelopes you picked up in Tesco. Leave nothing out! There are a few things you cannot claim VAT back on however. These are:

• Petrol (diesel yes, petrol no, sorry)
• Accomodation - except in relation to a conference
• Meals, especially drink
• VAT paid outside of Ireland
• Car rental or Car hire

But everything else you can find, round it up and enter it in to SortMyBooks like so: (click on the image to see it more clearly)

As you are entering your bits of paper, you can write the reference number from SortMyBooks onto your paper to create an audit trail. This just means that later on you will be able to match up the paper you have filed away with the entry you made on the computer for whatever reason like for example a Revenue audit.

 Ok, done purchases. now for sales. Let’s see, how do you gather them?

Sales - if you use a till

Retailers - For VAT purposes your sales are whatever you took in from your till. Not what was left after paying out for the window cleaner, DJ, pocket money for the kids, etc, but what you actually took in. You can get this straight from your Z-reads, or from your cashing up sheets, or if you have a computerised till system, you can get a reading for the last six months broken down by VAT period. If you just use your till like a big change-maker, then you are going to need to gather your sales from your little red book that you wrote your takings down in. Either way, go ahead and enter them into SortMyBooks by clicking on the till roll button and entering here:

Sales - Invoices 

Others - If you issue VAT invoices to people, you can find your sales records in your docket books, or invoices written up in Word or Excel, or maybe you already have them totaled in a spreadsheet. Whichever, click on the Invoices button and enter them here:

Sales - Money Received 

Don’t pay more VAT than you need to though,  if your turnover is less than 1 million euros in a year, you don’t have to pay VAT on invoices that you haven’t been paid for. This is known as ‘cash receipts’ basis for VAT. The bad news is you are going to have to find out who paid you and who didn’t. Again, easy enough if you have written it into your lodgment book as you received cheques from people. Use the Lodgements button to tell the system who paid you and who didn’t, so you are only paying over the exact amount of VAT that you need to.

VAT Return

Ok everything is in, now what? Now you click on the VAT3 button and print your VAT3. You can copy the T1 and T2 totals into your green VAT3 form and send it off to the Revenue. You’re done! If you are filing online, you can upload your VAT return directly from the software if you like.

Mini Financial Review 

Click on Accounts, Profit and Loss to see a summary of what you just entered, showing you what you sold and what you spent over the six months, and overall what your profit and net margin was.

So that’s it, you are done, done done! And now that you have had a taste of how easy it is, and how informative it can be about your business, I hope you will spend one hour a week on financial control from now on!

Fo rmore info, The Irish Revenue Commissioners have issued a new VAT Guide - have a look!