Keeping On Top of VAT


VAT can be a taxing exercise for traders, however ensuring that certain systems are in place can reduce both the ongoing administration and the possibility of any nasty surprises down the road. Therefore keeping on top of VAT compliance should be a great comfort to those registered for VAT.

Return of Trader Details (“VAT RTD”) Explained

Revenue have stepped up their enforcement of the rules surrounding the obligation on VAT-registered persons to file their annual VAT RTD. Whilst the legislation around filing this return has long been in place, until recently it was often overlooked by taxpayers, their agents and Revenue when assessing a taxpayer’s compliance.

Revenue now require all RTDs to be filed in accordance with the relevant legislation. In an effort to encourage taxpayers to prepare and file the RTD return on a timely basis Revenue are now withholding repayments of tax, such as Corporation Tax or VAT, where the VAT RTD for the prior year is outstanding.

In general terms the VAT RTD is an annual return providing a statistical breakdown of the supplies of goods and services; acquisitions of good and services (both for resale and not for resale); acquisitions from other EU countries and non-EU imports, at the relevant VAT rates (i.e. 0%, 9%, 13.5% or 23%).

For sole traders, it corresponds with the calendar year, so the 2014 RTD will need to be filed by 23rd January 2015 – a date for the diary!

 For companies, the RTD should be filed in accordance with that company’s accounting year end.

Revenue have advised that withholding tax refunds is merely the first step in a number of developments they wish to implement in respect of the RTD return. Therefore it is best to confirm that measures are being taken on an ongoing basis to ensure that the return can be prepared quickly and easily when the time comes. Simply making sure the correct codes are being used in bookkeeping software can save headaches down the line. If you have any queries surrounding the RTD, please contact the tax department who will be happy to help.

VAT Fraud

Unfortunately, in most cases involving VAT fraud there is an instigator and an innocent victim. It is important to take steps to avoid being embroiled in fraud when conducting your business. The EU Court recently held that when a taxable person knew, or ought to have known, that the transaction they were entering into was a fraudulent transaction, their right to claim VAT input credits and zero-rate intra-EU invoices will be restricted. Of course, Revenue will also apply penalties where appropriate.

In order to minimise the chances of being caught up in VAT fraud, it is important that sufficient due diligence is carried out when entering into deemed ‘higher risk’ transactions. Typical questions which should be asked include:

  •  Am I being offered an abnormally ‘good deal’, such as extended credit terms or no commercial risk?
  • Am I being required to make payments to an offshore bank account or to a third-party?
  • Are the goods in question high value, yet being sold by a newly established trader?
  • Does this transaction appear commercially viable for both parties?
  • Does the transaction involve zero-rating goods between EU countries?

It is important that you document all due diligence carried out on suppliers, as you may need to demonstrate that sufficient steps were taken in the event of Revenue Audit.

And always remember – if a proposition looks too good to be true, it probably is!