VAT, Repairs, the 2/3 Rule.......?

crosstownk

I'm no accountant, and I can't find an Accountants forum, so I'll post this here....

My question is in relation to VAT charged on servicing/repairs to motor vehicles.

Normal motor repairs such as servicing and repairs have VAT levied at 13.5% on both parts and labour. Exceptions to this are accessories, tyres and batteries whereby the parts incur 21% VAT but the labour is at 13.5%.

Now, in most other instances (lets say a repair to your washing machine) all parts are charged at 21% VAT and the labour is charged at 13.5% except when the parts exceed 2/3 of the pre VAT total (parts and labour) - in this instance the highest rate of VAT is applied to the pre VAT total. This is apparently known as the "two thirds rule" - anyone with an unhealthy obsession for all things VAT :eek: will probably be aware of this.

The two thirds rule does not apply to passenger vehicles (including motorbikes).

Take a crash repair with expensive parts and little labour, e.g. replacing manufacturer pre-painted bumpers. The bumper comes painted from OE spare parts supply and costs €890 (+VAT) and the labour to fit the bumper is €250 (+VAT). The parts constitute more than 2/3 of the pre VAT total. The labour will incur VAT at 13.5%, but what about the part? Does it get hit with 21% or 13.%...............

I've looked up some VAT information on the revenue site and it doesn't really clarify it.

If anyone could answer this convincingly I'd appreciate it as it would save me having to call Revenue tomorrow and spending infinity on the phone.

Of all people I should know this, but I never really had to concern myself the finer points of VAT legislation - I left that to the Finance Dept.;)

Alun

There is an Accountancy forum here http://boards.ie/vbulletin/forumdisplay.php?f=872

crosstownk

Alun wrote: »

There is an Accountancy forum here http://boards.ie/vbulletin/forumdisplay.php?f=872

That tells you how hard I looked

Mods, can this be moved as I think it's more suited in Accountancy.

unkel

Moved to Accountancy

Mr. Incognito

You actually have this backward. Labour is charged at 13.5% (supply of services) EXCEPT where the goods are more than 2/3rds of the total cost of the repair in which case the labour is charged at the rate of the goods in question. (supply of goods and services)

The logic for the exception is that for mechanics the good sare always going to be more than 2/3's of the labour costs and thus without this exception all supplies of these types of services which would normally attract a rate of 13.5% would default to 21%.

In your case here you are fitting a bumper to a motor vehicle so apply a rate of 13.5%. on the labour (The exemption still applies )

crosstownk

SetantaL wrote: »

In your case here you are fitting a bumper to a motor vehicle so apply a rate of 13.5%. on the labour (The exemption still applies )

Thanks. Yes I know the labour attracts 13.5% VAT - but what about the part? Parts normally have 13.5% applied (passenger vehicles), but while the labour will always be 13.5%, does this still apply to the parts if the parts exceed 2/3?

Mr. Incognito

The 2/3's rule applies to the rate on labour not on parts. The parts rate will always stay at the applicable rate for that good. Re-read the post above.


and anyway basically you're asking if the parts rate that normally is 13.5% will default to the labour rate of 13.5%........... the answer is no but if both rates are the same why even ask the question?

crosstownk

So taking your point of view, the parts should remain at 13.5% which answers my question.

Many thanks.