2/3rds rule & VAT

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Hi there..

Typical example; plumber comes along and fixes your washing machine and charges you €50. The parts cost him €40 and the labour is €10.

VAT is at 23% as material cost more than 2/3rd of sale price.

=> that is a fairly simple example which many will be aware of

However, what about a business which manufactures the goods that are then installed. E.G: window company buys parts for €100 and the direct overheads (light & heat, utilities, labour) is €50 and they sell it for €200 with installation.

Does that breach the 2/3rd rule? I can see an argument that it does because surely if that item was sold in their premises at retail, the VAT rate would be 23% so how can it be 13.5% when the installation costs were less than 25% of the total cost?

On the hand I have never seen anyone seeking to include costs of delivery or associated costs with the costs of goods when establishing the 2/3rds rule.

Dilemma.

dbran

It is the VAT exclusive cost of the goods to the supplier that is counted when calculating the 2/3rds rule, not just the cost of the goods. This would therefor include any costs incurred to third parties.

dbran