Revenue Note for Guidance

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Revenue Note for Guidance

Chapter 2 – Adjustment and recovery of consideration

45. Adjustment and recovery of consideration


This section gives a right of adjustment of the price of goods or services under a contract if the amount of VAT payable in respect of the supply differs from the amount included in the price or provided for under the contract. VAT is generally due at the rate in force at the time of the supply or at the time of the issue of the invoice. If a contract has been entered into at a particular VAT rate, and the rate changes before the contract is fulfilled, adjustments that might be needed are provided for in this section.

The section also provides that where the tax is shown separately on an invoice issued by an accountable person, that tax is part of the price and is recoverable accordingly. (Flat-rate farmers have the same recovery rights in respect of the flat rate addition – see section 86(2).)


(1) This subsection gives a general right of adjustment of contract prices by reference to changes in the amount of tax payable on supplies made under the contract. However, the parties to a contract may agree among themselves that the provision will not apply to the particular supply of goods or services governed by the contract. In that case, it is a matter for the parties to provide for the price adjustment, if any, which will be made. The supplier would, of course be liable for the correct VAT liability arising on the supply of the goods/services.

Example: Supplier agrees to supply goods/services for €100,000. The VAT rate increases before the contract is complete. In the absence of an agreement, the agreed price can be increased to include the extra VAT.

(2) The right of having an adjustment in price made under subsection (1) will apply when there is a change from a situation in which tax is chargeable at a positive rate to a situation in which the zero rate or an exemption applies, or vice versa.

(3) Where the tax is shown separately on an invoice issued by an accountable person, that tax is part of the price and is recoverable accordingly. An accountable person must show the tax separately on invoices issued to other taxable persons and, therefore, may find it convenient to show it separately on all invoices.

(4) The provision in subsection (3) applies to an invoice issued to another accountable person only if the invoice is in proper form for VAT purposes. In other words, if an accountable person refuses to issue a proper VAT invoice to another accountable person, he or she will be unable to enforce payment of the element of VAT included in the price.

Relevant Date: Finance Act 2020