Róisín Shortall (Dublin North West, Social Democrats)
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88. To ask the Minister for Finance further to Parliamentary Question No. 33 of 13 October 2016, the other measures that are in place to support businesses supplying services who experience a very significant tax step effect at the VAT entry level. [31345/16]

Michael Noonan (Limerick City, Fine Gael)
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As stated previously, Irish VAT law must comply with the EU VAT Directive (Council Directive 2006/112/EC), including the provisions governing VAT registration thresholds and therefore there is no scope to increase the existing thresholds at present. However, I would point out again that Ireland's VAT registration threshold for small businesses supplying services is the seventh highest in the EU.

Where a business registers for VAT it must charge and account for VAT on its taxable supplies and is entitled to recover any VAT incurred on goods or services used for the purposes of its taxable supplies.

The measures in place to assist small business in relation to VAT include:

Cash Receipt Basis

VAT is usually accounted for on the basis of invoices issued. However, the cash basis of accounting provides traders with the option to account for VAT on a cash receipts basis. This means that the trader is not required to pay VAT until payment for the supply is received.  Availing of this option assists firms in the critical area of cash flow.  In order to avail of this option, a business must be supplying goods or services mostly to unregistered persons, or have an annual turnover of less than €2 million.

Returns and Payments 

Generally, returns and payments must be made to Revenue by the 19thday of the month following the end of each two monthly taxable period.  An extended deadline of 23^rdof the month is applied where returns and payments are made electronically to Revenue. 

Exceptions to the main rule include:

- Returns may be submitted for a six monthly period by persons with annual liabilities of €3,000 or less.

- Returns may be submitted for a four monthly period by persons where the liability is between €3,001 and €14,400.

- An accountable person with a bi-monthly VAT liability of up to €50,000 may pay VAT by direct debit in monthly instalments, which assists seasonal businesses in managing their cash flow.

Simplified/Summary Invoicing

A simplified invoice, credit note, settlement voucher or debit note may be issued either where the amount of the invoice is not greater than €100. Summary invoices may be issued where multiple supplies are made to the same customer during a calendar month. Minimum particulars are required to be included on a simplified invoice or a summary invoice.

Electronic Invoicing

Electronic invoicing reduces burdens on business, supports small and medium sized enterprises and provides more flexibility for business regarding their invoicing obligations. 

Other tax measures in place to assist small business include:

Corporation Tax

For small businesses that are conducted through a company, a corporation tax measure is in place to support new business development. This takes the form of a relief from corporation tax which is available for start-up companies in their first three years of trading.  The relief is granted by reducing the corporation tax payable on the profits of the new trade and gains on the disposal of any assets used for the purpose of the new trade.

The availability of the relief is linked to the amount of Employers' PRSI paid by a company in an accounting period, subject to a maximum of €5,000 per employee and an overall limit of €40,000. Where the total corporation tax payable by a qualifying start-up company for an accounting period does not exceed €40,000, the aggregate amount of corporation tax referable to income and gains of the qualifying trade in that period will be reduced by the amount of qualifying Employers' PRSI.  Any relief not availed of in the first three years of trading, due to losses or insufficiency of profits, may be carried forward for use in subsequent years. This is subject to the amount of relief in any year not exceeding the Employers' PRSI contributions of the company, with relief for these contributions capped at €5,000 per employee and €40,000 in total for a year.

The overall limit of the relief is €40,000 in each of the three years and marginal relief is available where the company has a corporation tax liability between €40,000 and €60,000. No relief is available where the corporation tax payable is €60,000 or more. The maximum relief allowable over three years is therefore €120,000.

The relief is not available in respect of certain activities, including where the trade consists of service company activities as defined in section 441 of the Taxes Consolidation Act 1997. This includes companies whose business consists of carrying on a profession or the provision of professional services.

Employment & Investment Incentive (EII)

Small businesses, in their start-up phase, that need to raise additional capital may be entitled to do so under the Employment & Investment Incentive (EII).  Under EII, individuals who buy shares in qualifying companies are entitled to income tax relief.

Filing of returns on a quarterly basis

To further reduce the administrative filing burden and to improve cash-flow for small businesses where these businesses have annual PAYE/PRSI or RCT liabilities of less than €28,800, these businesses are eligible to file returns on a quarterly basis rather than on a monthly basis.