Pay VAT when you actually receive payment, or when you issue the invoice? The basis you choose changes your cash flow, not the total VAT you eventually pay.
Last updated: June 2026
Under the invoice basis (the default), you account for VAT in the period you issue an invoice, regardless of whether your customer has actually paid you yet — meaning you can owe VAT to Revenue before you’ve collected it. Under the cash receipts basis, you account for VAT only once you’ve actually received payment.
You’re generally eligible if your annual turnover is under €2,000,000, or if at least 90% of your turnover comes from supplies to unregistered persons (like the general public), regardless of overall turnover level. Most small businesses and freelancers comfortably qualify under the turnover test alone.
Cash receipts basis tends to suit businesses with a gap between invoicing and payment — avoiding the situation where you owe VAT to Revenue on an invoice a client hasn’t settled yet. It also offers natural protection against bad debts, since you never owe VAT on money you never actually collect.
No, it only changes the timing of when VAT becomes due — not the total amount owed over the life of a transaction.
Yes, subject to notifying Revenue and meeting eligibility requirements at the time of the switch.
No, you generally need to elect this basis with Revenue — it isn’t applied automatically just because you qualify.
You may still qualify if at least 90% of your turnover is from supplies to unregistered persons, even above the general turnover threshold.
Cash receipts basis is common among freelancers specifically because it avoids paying VAT on invoices that haven’t been paid yet, a genuine cash-flow benefit.
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