Vat threshold ‘not sufficiently widened’

The Government’s decision to increase the Vat cash accounting threshold has been welcomed by business groups.

However, commentators say the threshold — which is to be upped from €1m to €1.25m — is not being widened enough.

The threshold is one of the few reliefs for cash-strapped small businesses in their battle against overdue payments.

The scheme allows companies pay Vat to Revenue only after they have received due payment from their own customers; as opposed to larger firms which are required to pay when invoiced by Revenue.

From next month, any SME with an annual turnover up to €1.25m will have until it gets paid by customers before it needs to pay its Vat bill.

Ibec chief economist Fergal O’Brien said: “Out of the 147,000 employers in the State, approximately 115,000 employ between one and nine people; and many of them would fall into that €1m-€2m turnover range.”

He said the measure was a “significant step in the right direction” and would help cash flow, but that the threshold should have been wider.

Ibec and small firms lobby groups Isme, along with the Small Firms Association, had all been looking for the threshold to be widened from €1m to €2m; but each expressed satisfaction a degree of movement had been made on the matter.