Revenue updated their publications for VAT guidance for advance payments on 19 August 2025. These updates aren’t made to fill time, they signal areas Revenue is paying closer attention to. There’s no change in the law, but it’s a reminder to refresh our understanding of how deposits and payments on account should be treated for VAT, and the invoicing rules that apply
Invoice requirements of payments if received in advance
Not All the Money Is Yours
I see this all the time. A business takes a deposit on a job, credits it to the customer account and leaves it there until the job is finished and the final invoice is raised.
On the face of it, this makes sense. That money is already spoken for. It’s there to cover your costs in preparing for the work and covering the costs of materials etc. The problem? A slice of it belongs to Revenue in the form of VAT.
The Rules (Invoice Deadlines)
When you receive a payment on account before completing the supply you are required to raise a VAT invoice.
The invoice needs to be raised by the 15th day of the month following the month in which the payment was received.
So, for example, if you receive a deposit today, the 29th August 2025, the corresponding VAT invoice has to be raised by 15 September 2025 and that then goes into the Jul-Aug bimonthly VAT3 and gets paid over to Revenue by 23rd September 2025. In other words, the deposit in your bank account is already potentially nearly 1/4 less than you think once VAT is accounted for.
VAT is triggered when the payment is received, so it belongs in the July–August VAT3 return. While the law gives you until 15 September to issue the invoice, in practice most systems will only allocate the VAT correctly if you date the invoice August. Otherwise, it risks slipping into the wrong period
This rule does not apply to intra‑Community supplies of goods
The Law (Section 74(2))
Under Irish VAT law, advance payments are basically treated as a supply in themselves. VAT becomes due when the payment is received.
The technical reference, in case you want it, is Section 74(2) of the VAT Consolidation Act 2010 says:
“…the tax chargeable under section 3 (a) or (c)… shall be due not later than the time when the amount in respect of which it is payable has been received in full or in part, and where the amount is received in full or in part before the supply of the goods or services to which it relates, a supply for a consideration equal to the amount received… shall be deemed, for the purposes of this Act, to have taken place at the time of such receipt.”
In plain English: once you’ve got the money, VAT is triggered.
Failing to issue VAT invoices within the statutory timeframe can lead to penalties:
FORFEIT DEPOSITS
If a contract is cancelled and the deposit is forfeited, you used to issue a credit note for the VAT amount only. That’s no longer the case. You suffer the VAT when the money is received and that’s that.
Practical Tips:
- Reconcile the bank regularly
Match cash receipts against invoices and review the debtor ledger. Pay particular attention to accounts showing credit balances — in most cases, these indicate deposits or payments received that don’t yet have an invoice issued (unless explained by something like a credit note). - Double VAT Rates and Review Exemptions
If you’re dealing with intra‑Community supplies, know that standard advance payment rules do not apply. - Get a Good Accountant
A good accountant won’t just file the return. They’ll make sure you know about things like this that trip businesses up.
Final Thoughts
Getting VAT right on payments on account isn’t just about ticking a compliance box. It’s key for managing cash flow, staying on top of VAT liabilities and when they’re due, and keeping Revenue onside. If you need help on VAT, or any of your accounts, just reach out we’re here to make it simpler.
-Lisa
Lisa Lokasto 
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