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Vat on Vehicle Servicing

  • 09-08-2024 7:25am
    #1
    TitianGerm
    Registered Users, Registered Users 2 Posts: 28,695 ✭✭✭✭


    I came across a confusing situation recently and I wanted to ask others who may have experience what their thoughts on this are as I've been in Financial Services for a while now so my day to day vat knowledge has dried up considerably.

    A friend of a friend was looking to set up a mechanics business and asked for a quick chat. I walked him through the usual, register for income tax, year ends, potential turnover and then registering for Vat based off his estimations.

    I had thought that the 2/3 rule would apply as he is providing a service and as such if the parts associated with a service made up 2/3 of the ex vat cost to the consumer then 23% should be applied to the whole invoice. If not then 23% to the parts and 13.5% to the labour element.

    However when I looked further into it I see that maintenance of vehicles is excluded from the 2/3 rule as seen here.

    Services taxable at the rate of the goods (the two-thirds rule)

    https://www.revenue.ie/en/vat/vat-on-services/two-thirds-rule/index.aspx

    This page explains the two-thirds rule for VAT

    I then came across this section which had me thinking that the whole service should be chargeable at 13.5% except tyres, batteries etc

    MOTOR VEHICLES - REPAIRS (Certain repair and related services)

    https://www.revenue.ie/en/vat/vat-rates/search-vat-rates/M/motor-vehicles-repairs-certain-repair-and-related-services-.aspx

    MOTOR VEHICLES - REPAIRS (Certain repair and related services)

    However the word repair here threw me and had me leaning towards this section relating to repair of damaged vehicles rather than maintenance?

    What are your opinions on this or how do you normally deal with this in practice on a daily basis



Comments

  • #2
    Lenar3556
    Registered Users, Registered Users 2 Posts: 1,710 ✭✭✭Lenar3556


    There was a tax and duty manual piece on it somewhere (with examples), if you google search you might find it.

    The motor industry isn’t within the scope of the two thirds rule, so it doesn’t arise.

    My general understanding is that most activities carried out by a typical garage are at 13.5% on the full supply (parts and labour)

    Not the case for tyres & batteries - the full supply and fit is at 23%.

    You have to be careful with VAT, it varies significantly between and even within industries.



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