Charging VAT when Goods are supplied with a service

troyh

Hi, I am a carpenter and recently became a self employed. I'm trying to determine how I charge VAT properly. I understand that if the total cost of goods supplied is greater than 2/3's of the job then I charge 21% of the total job. For example say Materials = €1000 and labour = €400 then total = €1400 Plus VAT @ 21% = €1694. So I pass on €294 to revenue.
How does this work where the materials do not account for 2/3's of the job? E.G. Say Materials = €500 and Labour = €500. Is it correct to simply charge 13.5% to my customer which would bring the total to €1135 and pass the €135 to the VAT man. What happens to the difference between the 21% paid for the materials and the 13.5% I actually paid to the TAX Man?

Please someone enlighten me!

- T

RoryW

Revenue Guide to VAT on Goods and Services Sold together

kluivert

troyh wrote: »

What happens to the difference between the 21% paid for the materials and the 13.5% I actually paid to the TAX Man?

Please someone enlighten me!

- T

It goes into your pocket, so dont complain or shout about it too loud ok. Only messing.

I personally think its an incentive for construction workers. But the taxman still gets his cut.

For example.

Buy materials with a Vat rate of 21% and Charge 13.5% on the services rendered.

So in real basic terms, you buy materials for 100e plus 21% vat = 121e
You raise a bill for the cost of the materials and labour say 100+100 plus 13.5% vat = 227e.

Vat at 13.5% is 27e
Vat at 21% is 21e

Tax man gets 6e.

Plus you get taxed on the profit in your Income tax as well.

JackieO

In the instance you mention Troyh, where the materials do not account for 2/3's of the job e.g. materials = 500 and labout = €500 then you apply 21% to the materials and 13.5% to the labour. so really there is no discrepency between the VAT you have paid on the goods and the VAT you are charging on the goods.

Does this make sense?

Alix

Hey there Im sure you've received your answers in other threads , but I'll through in my bit as Im accountant for Goods/services company and invoice both labour and service on the one invoice regularly

Firstly,

Take total of invoice ( ex Vat ) , say € 900 goods , € 300 service = € 1200
Divide € 1200 by 3 to get a 1/3 = € 400. Now If labour is higher than the € 400 then 13.5% vat charged on € 1200. But if goods are greater than 2/3 of total invoice then charge Vat at 21%.

Not sure if this helps