VAT questions

1874

Im just trying to get it straight in my mind, where VAT is going?

If a person engages the service of we'll say a plumber/painter/electrician who is charging X for a job which includes VAT.
The customer pays the tradesperson that, then can the tradesperson claim that all back?
I'm looking at this from the perspective of the customer, where a tradesperson might say they can get a preferential price for parts/materials required, be it a tap, light switch or paint as examples of each trade (but also in relation to the service provided).

The customer pays the full amount of VAT, then can the tradesperson claim this all back?
Where is the benefit to the customer in certain circumstances as it seems the VAT is just a 23% or 13.5% added fee going to the tradesperson,
VAT is usually referred to in terms as if the tradesperson is passing this all along to the taxman and it is unavoidable for them? but in reality they can claim it or some of it back?

E.g for material an individual might source a good quality item (the same item that a tradesperson might source), new at as good a price or better than the tradesperson can.
What is the situation in relation to services, does a tradesperson pass on all the VAT to the taxman?

Rulmeq

VAT goes to the government (provided everyone in the chain is honest).

Stheno

You deduct the vat you pay from the vat you receive and if you receive more than you pay it goes to Revenue

1874

Sorry, I just dont use it so Im trying to understand

What VAT "edit what rate" (in this example) does a tradesperson pay and for what?

You say they can claim back the difference between what they charge and what they pay,

Im just trying to understand then, if there must be some point at which it is worth it to the tradesperson to ensure that a customer purchase materials through them, even though the customer might get a better or as good a deal on price and delivery,
Or there might be a point which it is better for them to go along with a customer purchase materials themselves. (and all still be legitimate taxwise)

Is all VAT rolled into one cost, so on materials and services even if its a different rate?

Kingp35

The trades person can claim back any VAT they they paid in purchasing materials for the job.

Any VAT they charge you for doing the job must be paid in full to Revenue. The trades person does not keep any of the VAT that was charged to the customer.

Only VAT relating to purchases made by person/company can be claimed back and even then only certain purchases and under certain circumstances.

VAT is extremely complicated.

exaisle

For the most part, VAT isn't that complicated (but it CAN be!)

If we look at OP's original post with a few numbers added:

OP pays Tradesman €1000 including VAT @ 13.5% for the job.

Tradesman has paid €369 including VAT @ 23% for the materials.
Let's also assume that the tradesman has no other expenses.

The VAT collected by the tradesman from the OP is 1000 / 1.135 x .135 = 119

The VAT paid by the tradesman on the materials is 369 / 1.23 x .23 = 69

So, the Tradesman's VAT bill for this transaction is 119 minus 69 = 50.

The €50 goes to the tax man.

Hope this explains it, albeit in very simplistic terms...but NOW for the complicated bit:

If the OP spends more than €5000 in any one year on home improvements, he may be able to get the VAT element back via the Home Renewal Incentive Scheme... ;-)

Calahonda52

1874 wrote: »

...
Or there might be a point which it is better for them to go along with a customer purchase materials themselves. (and all still be legitimate taxwise)
...

Example A
Tradesman buys item for 1000 euro before VAT
Labour for job is 500
So total pre vat is 1500
vat is 13.5% on this 202.50: total 1702.50

customer buys item for 1230 euro including VAT
Labour for job is 500 plus VAT at 13.5% = 567.50

customer total 1797.50

Difference is 95 which is difference in VAT rate of 23-13.5 = 9.5%

If goods cost 1001 and labour 500 then VAT of 23% applies due to 2/3rd rule
https://www.revenue.ie/en/vat/vat-on-services/services-taxable-at-the-rate-of-the-goods-the-two/index.aspx