VAT & Payroll Tax Checklist for New Irish Small Business Owners

Use this checklist to ensure you stay compliant with Revenue from day one.

1. Determine if You Need to Register for VAT

Check your expected 12-month turnover:

• Supplying services only and expect turnover to exceed €42,500

• Supplying goods (or 90% goods + some services) and expect turnover to exceed €85,000

• Forecast business growth that may push you over these thresholds mid-year

• Operating on a rolling 12-month basis (not calendar year)

Consider voluntary registration if:

• You have significant reclaimable VAT on expenses

• Your clients are VAT-registered businesses

• You want to appear more established in B2B sectors

Once registered for VAT:

• Charge VAT at the appropriate rate (usually 23%)

• Issue VAT-compliant invoices

• File VAT returns (generally bi-monthly)

• Maintain proper VAT records for at least 6 years

• Track VAT on purchases you can reclaim

2. Understand Irish VAT Rates

Check the rate relevant to your goods or services:

• 23% standard rate

• 13.5% reduced (e.g., certain services, construction, energy)

• 9% special sectors (e.g., some hospitality services, if applicable at the time)

• 0% for qualifying goods/services

• Exempt if your activity falls into specific categories (financial, medical, education, etc.)

3. Register as an Employer (if hiring)

If you employ anyone, including part-time staff:

• Register your business as an employer with Revenue before first payment

• Set up a compliant payroll system

• Ensure you have employee PPSNs and tax details via Revenue’s real-time reporting (RTS)

4. Calculate and Deduct Payroll Taxes Correctly

For every employee, ensure your payroll system:

• Calculates PAYE (Income Tax)

• Calculates USC

• Calculates Employee PRSI

• Calculates Employer PRSI (your business cost)

• Reports payroll through Revenue before or on the pay date

• Pays payroll taxes to Revenue on time each month

5. Factor in Employer Payroll Costs

Make sure you budget for:

• Gross wages

• Employer PRSI

• Holiday pay & bank holiday entitlements

• Pension contributions (if applicable)

• Any statutory benefits, sick pay obligations, etc.

6. Watch Out for Common Mistakes

Avoid these frequent small-business errors:

• Forgetting the rolling 12-month VAT test

• Missing VAT filing deadlines

• Misclassifying contractors vs employees

• Ignoring employer PRSI when budgeting staff costs

• Failing to maintain VAT and payroll records

• Paying an employee before registering for PAYE

7. Keep Good Records

Best practice:

• Store VAT invoices, receipts, and payroll records for a minimum of 6 years

• Reconcile accounts monthly

• Use accounting software (e.g., Xero, Sage, QuickBooks) to automate VAT & payroll

• Back up all financial documents

8. Ask for Professional Help When Needed

Consider speaking with an accountant if you:

• Are unsure whether you should register for VAT

• Expect growth or cross-border trading

• Are hiring staff for the first time

• Want to set up proper bookkeeping or payroll systems

• Receive a Revenue query or audit letter