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GAZETTE
N
NOVEMBER 1992
Value Added Tax
Implications of change to basis of
assessment
Section 177 of the Finance Act, 1992
provides that where a registered
supplier wishes to avail of the
monies received basis of accounting
then 90% or more of the value of
supplies or services being provided
by him must be to unregistered
persons. This effectively means that
most, if not all, practices currently
paying VAT on a cash receipts basis
will no longer be eligible to do so
and will be obliged to change to
accounting for VAT on a fees issued
basis. The legislation empowers the
revenue authorities to seek such
changes as from 1 January, 1993 and
it is our understanding that
appropriate notices will issue to all
practices currently registered on a
cash receipts basis in advance of that
date. These changes have two major
implications:
1. Cash flow;
2. Accounting/computer systems.
1. Cash Flow
Practices obliged to change from a
cash receipts basis to a fees issued
basis as at 1 January 1993 will
become liable to a "double hit" of
VAT which is payable in March,
1993.
The first element of this payment
will be the normal VAT arising, on a
fees issued basis, for the taxable
period January/February, 1993.
The second element arises on the
conversion from cash receipts basis
to fees issued basis. The amount is
calculated on the difference between
debtors as at 31 December, 1992 and
debtors on the date from which the
cash receipts basis of accounting was
first authorised or 31 December,
1986 if later. The rate(s) of VAT to
be applied to that excess will be the
average rate(s) appropriate
to cash receipts in the year ended 31
December, 1992.
This charge could be quite
significant as in the general run of
firms the level of debtors will have
increased quite substantially between
1986 and 1992.
We understand, but are as yet unable
to confirm, that where cash flow
difficulties arise, the Revenue
Commissioners may be prepared to
accept payment over the first three
VAT returns in 1993. Practices facing
difficulties in this regard should take
up the matter directly with their
local VAT inspector.
We gather that the Revenue
Commissioners are preparing a
Statement of Practice covering this
whole area which will probably have
been issued by the time this note is
printed.
2.
Accounting/Computer Systems
All such systems should be examined
to ensure that they will be capable of
handling the changed basis of
accounting and of producing the
required information for VAT returns
on the fees issued basis. In the case
of computer systems this may
necessitate a rewrite of programs
which will require some lead time
and action should accordingly not be
left until 1 January.
It is suggested that practices should
immediately look into these matters
with their bookeepers/financial
controllers and auditors if necessary
if they have not already done so.
(See also article by
Fergus Gannon
on page 355 of this issue of the
Gazette).
Technology
Committee
N.B.
Please note a letter from the
Conveyancing Committee concerning
undertakings to lending institutions
which has been distributed to all
members of the Law Society with
this
Gazette.
Supr eme Court
Appointment
t
The Honourable Mr. Justice John
Blayney
The Honourable Mr. Justice
John
Joseph Blayney
was appointed a
Judge of the Supreme Court by the
President of Ireland, Mrs. Mary
Robinson, on 16 October last. Mr.
Justice Blayney will fill the vacancy
which arose following the tragic
death of The Honourable Mr.
Justice Niall McCarthy.
Mr. Justice Blayney was educated at
Belvedere College, Dublin, Glenstal
Abbey, Co. Limerick, UCD and the
King's Inns. He was called to the
Bar in 1948 and became a Senior
Counsel in 1974. He was appointed
a High Court Judge in January,
1986.
Mr. Justice Blayney was born in
Dublin. He is married to
Bernadette
Boullier
and the couple have six
children.
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