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2/3rds rule & VAT

  • 23-08-2016 08:49PM
    #1
    Registered Users, Registered Users 2 Posts: 219 ✭✭


    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.


Comments

  • Registered Users, Registered Users 2 Posts: 2,092 ✭✭✭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


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