Irish SMEs and Microbusinesses are being urged to assess how they are calculating their VAT Returns to the Revenue by the Institute of Certified Public Accountants in Ireland. The CPA says companies should seek to operate VAT on a cash receipts basis.

“88% of our members are seeing viable businesses getting into trading difficulties because of the lack of credit available from our financial institutions. Cash is King, and there is no point paying money unnecessarily to the Revenue Commissioners, when it is needed to fund the day to day operations of the business”, said John White, President of the CPA Institute.

White was announcing details of the CPA Annual National Conference 2009 which will take place on Friday 22 May in the Radission SAS Hotel, Cork. The theme of this year’s CPA conference is Survive, Recover, Prosper and will address how, despite all the doom and gloom, opportunities do exist for companies with the right strategies.

According to White, smaller businesses accounting for tax on an ‘invoice basis’ should investigate with Revenue if they can convert to accounting on a ‘cash receipts’ basis. Returning VAT on a cash receipts basis means the business does not pay the VAT on their sales until the invoice has been paid. On an ‘invoice basis’ VAT must be paid when the invoice is issued.

“This would result in significant cash flow advantages for the business, particularly those already suffering delays in receiving payment from debtors. Recent surveys suggest the average payment period is now 69 days with 32% of small businesses experiencing delays of 90 days[¹]. Late payment is a serious day-to-day business issue, particularly now that the financial crisis has put paid to many of the cash flow options that were previously available to small businesses.

“It is time for Revenue to ‘get creative’ and identify how, with minor changes in the tax code they can help businesses to survive and recover”, said White. “Currently businesses whose turnover does not exceed €1m qualify, with certain conditions, to return VAT on a cash receipts basis. There is no loss to the exchequer as VAT is still collected and we believe it is time for Revenue to broaden the conditions and bring more companies into the cash receipts basis net”.

“In this, the first European SME week, it is important to remember that over 90% of businesses in Ireland are either micro, small or medium enterprises. These companies will be critical to our economic recovery and deserve to be supported”, White added.

Speakers at the CPA Annual National Conference include; Dr Maarit Lindstrom, Chief Economist, Finnish Chamber of Commerce, Pat McArdle, Chief Economist, Ulster Bank, Cara Driscoll, EAP Manager with VHI Ireland, Joe Hanley, MBA Lecturer, Smurfit Business School , Anthony Dinan, Managing Director, Thomas Crosbie Holdings, Joe Leonard, Director, Project Management Ltd and Peter Kealy, Managing Director, BWG Foods Limited (SPAR Ireland).