New Motor Service Business, help with VAT

JohnnyBoy12

Hi there

I am looking to open a new motorcycle service garage, I am not starting off with a lot of money so I'm trying to save a few quid where I can, I have done some accountancy work myself so I'm just looking to get some advice and help

What are the labour rates for parts and labour these days? And how does the claiming process work? I am currently getting registered for VAT, I will be doing my VAT returns every 2 months but just want to know how to claim what I need to claim, is it as simple as I buy parts at 23% and charge them at 23%? What about my labour, I charge on my labour but do I claim it back?

Any help on this matter at all would be greatly appreciated

Ardeehey

NOt an expert on this but with VAT there is the two thrids rule for the work that you provide. If the cost of a job that you do is more than 2/3 made up of parts then you must charge the full job at 23% (prevailing VAT rate on products)....otherwise you would charge at the prevailing VAT rate for a service (which I guess is 13.5%). Like I said I'm not an expert so maybe someone will clarify this.

In terms of what you can claim back then you can only claim VAT back on something you have input to....ie you can claim VAT back on the parts that you bought to complete a job....but you can't claim VAT back on a service.

Mr. Incognito

You should identify someone with some tax knowledge that can help you- your local rotary club or business or enterprise Ireland or other business start up assists are out there for free.

Read the VAT guide in the stickies and the guides on starting a business and best of luck with the enterprise.

Specific one on one advice is banned here as we are not insured or covered to give advice on Boards so you will not be able to rely on the forum for customised advice.

enricoh

would u not wait to see how u get on before registering for vat?
i know a few lads that registered on day one n regret it now - once yer in yer in.
think u can turnover near 40k before u need to register. declare everything n u'll be flat out working for the tax man

ask as many lads as u know in different business's and they'll (generally!) give u good advice. might drop me aprilia rs up to ya n see if u can get a victim!!
good luck

JohnnyBoy12

so to confirm, for a normal service, what VAT rate are parts and labour?

Ardeehey

Not sure but this may constitute a composite supply for VAT purposes and so the VAT rate of the prevailing part of the job would be the VAT rate for the full job...I would guess that the parts constitute tjhe main part of the job and the labour as being ancilliary therefore job would be at 23% as that's the VAT rate on the parts.

I'm pulling this from very limited knowledge so could have it completely wrong but there's some info frm the revenue website.

http://www.revenue.ie/en/tax/vat/leaflets/mixed-supplies-goods-services.html


18. "Two-thirds" rule: The current legislation is subject to the two-thirds rule. Accordingly the two-thirds rule continues to operate, as heretofore, where supplies of services also involve supplies of goods. In practical terms, in accordance with section 41 of the VAT Consolidation Act 2010, where a contract for the supply of services also involves the supply of goods (apart from food), the total consideration is deemed to be referable to the goods, where the VAT-exclusive cost of the goods exceeds two-thirds of the total contract price (excluding transport costs). In these circumstances the taxable person is liable to account for VAT on the total consideration at the rate applying to the goods.

JohnnyBoy12

I have seen some places say the 2/3rds rule doesn't apply to motor trade, also, see below

http://www.boards.ie/vbulletin/showthread.php?t=2056822433

dominicbrooks

Hi,very simple.Charge all service jobs(parts and labour)@13.5%.Any parts you buy for these jobs you can claim back the 23%.

Megan777

What happens if u end up paying the vat man money,
I've heard from one guy that is vat req, vat return done every 2 mths and he said his accountant said he had to pay €120 for the 2 mths,
How is this possible ?
Was he not doing enough work?

relax carry on

Megan777 wrote: »

What happens if u end up paying the vat man money,
I've heard from one guy that is vat req, vat return done every 2 mths and he said his accountant said he had to pay €120 for the 2 mths,
How is this possible ?
Was he not doing enough work?

There is nothing stopping you doing your own vat returns. If your business is relatively straightforward and you keep on top of your paperwork and follow the Revenue guidelines then you should be fine.
If you aren't comfortable with the above or don't have time for it then you need an accountant or book keeper to maintain your records and file your Vat returns for you.
Depending on your business you could always be paying VAT to Revenue, always claiming vat back or alternating.

http://www.revenue.ie/en/tax/vat/index.html

dominicbrooks

Megan777 wrote: »

What happens if u end up paying the vat man money,
I've heard from one guy that is vat req, vat return done every 2 mths and he said his accountant said he had to pay €120 for the 2 mths,
How is this possible ?
Was he not doing enough work?

If you are paying VAT then you are making profit.

Example

Cost of part 50 claim 23% VAT = 11.50

Service job: Part 50 plus profit (say 20) Total part 70 = VAT of 9.45(@13.5%)
Labour (say 50) VAT = 6.75 (@ 13.5%)

Total Pay = (9.45+6.75) = 16.20
Total reclaim = 11.50
Pay Revenue 4.70 (6.75 on labour minus difference between 11.50 and 9.45)