Adjustment of VAT
Finance Act (No 2) 2013 inserted a new Section 62 A into the VAT Consolidation Act 2010, which provides for an adjustment of the VAT deductible amount where businesses that fail to pay their suppliers within six months (3 VAT periods).
As well as providing a benefit for suppliers with their cash-flow by incentivising customers to pay on time, it also addresses situations where suppliers have claimed VAT bad debt relief but the customer has made no adjustment to the VAT reclaimed.
The VAT deductible in the third taxable period is reduced by the amount of VAT related to the unpaid consideration, resulting in the repayment of this VAT to Revenue. A readjustment may be made if the consideration is subsequently paid in full or in part. Where there are reasonable grounds for not having paid the full consideration, an adjustment will not be required provided this has been agreed with Revenue beforehand.
The provision relates to VAT deducted in taxable periods commencing on or after 1 January 2014.
If you require any assistance or further detailed explanations please do not hesitate to contact Declan O’Luanaigh on 01- 7998300.