Wiring Query

2011

CJ Haughey wrote: »

I completed a job on Tuesday, I had to go to an electrical wholesalers in the city as the light I brought with me was damaged.
It was on the shelf retail for €60, I got it for €50 all in as they gave me a trade price on it.

If this light was for sale at €50 including VAT @ 23% that would mean that the price of the unit was €40.65 excluding VAT.

The cost to a VAT registered business would be only €40.65 because as Stoner pointed out VAT is only paid once, by the end user (the customer).
A business that is VAT registered claims back all VAT that it pays.
So the net effect is that it does not pay any VAT at all.
I think that this is the part that is confusing you.

According to 2011 if he were invoicing he would only be €48 for that same light (€60 minus 23% vat).

Incorrect.
See above.

Have a read of this link from Revenue. I have shown the important part in bold and underlined the part about VAT registered businesses not paying VAT that you do not seem to agree with:

1. What is VAT?
VAT is a tax on consumer spending. It is collected by VAT-registered traders on their supplies of goods and services effected within the State, for consideration, to their customers. Generally, each such trader in the chain of supply from manufacturer through to retailer charges VAT on his/her sales* and is entitled to deduct from this amount the VAT paid on his/her purchases.

CJ Haughey

2011 wrote: »

Stoner pointed out VAT is only paid once, by the end user (the customer).

And my last example is where i only charged the customer vat only once, what are you disagreeing with in my last example?

2011

CJ Haughey wrote: »

And my last example is where i only charged the customer vat only once, what are you disagreeing with in my last example?

Was the price of €50 including VAT @ 23%?

CJ Haughey

2011 wrote: »

Was the price of €50 including VAT @ 23%?

Yes and that is irrelevant.

2011

CJ Haughey wrote: »

Yes and that is irrelevant.

No it is not, it is very relevant.
There is this thing called a "VAT return".

Definition: A VAT return shows how much VAT is due on Sales (output VAT) and how much VAT can be reclaimed on Purchases (input VAT) dictating how much is then paid or reclaimed from Revenue for a given period.

A VAT Return is used by VAT registered businesses to claim back VAT and pay the balance of VAT due from what that they have collected.
This is why the VAT registered business pay €40.65 for a light that a non VAT registered person would pay €50 for if they went to the shop to buy the same light at the same cost to the wholesaler.

So if you charged the customer €102 including VAT at 13.5%.
This is equal to €89.87 + VAT.

So in reality your business gets €89.87 out of which you have to pay €40.65 for the light, leaving you with €49.22.
You might not understand that but that is the reality unless of course you feel that VAT is "irrelevant" and you do not want to claim it back.


This link from Revenue might help you. They have done out a few examples.

CJ Haughey

Put vat aside for one second, is a contractor not allowed to make a mark up on materials? i.e make a profit on them.

iwillhtfu

Jaysus you two lads could do with your own thread.

OP get an electrician or two to price the job you might be surprised at what it comes in at.

If you are trying to save a few quid don't go buying the materials ask the electrician if there's any labour you can do to cut the cost a bit. Agree this before any work begins. He may get you to drill joists or install conduit and back boxes. Most contractors would be reluctant to do this but there's no harm in asking.

2011

CJ Haughey wrote: »

Put vat aside for one second, is a contractor not allowed to make a mark up on materials? i.e make a profit on them.

Of course you can.
Mark them up all you like.
This will not change the maths below though, because the materials will still cost the business the same amount.


Scenario 1

You charge €102 including VAT at 13.5%
This is equal to €89.87 + VAT.
You pay €50 for the light and refuse to claim back the VAT for reasons that you can not explain. VAT is now charged for the second time (already charged for in the €102 figure above).

Profit is now = €89.87- €50 = €39.87


Scenario 2

You charge €102 including VAT at 13.5% - Same cost to the customer
This is equal to €89.87 + VAT.
You pay €40.65 for the light because you have reclaimed the VAT

Profit is now = €89.87- €40.65 = €49.22 - 20% increased profit to the business

CJ Haughey

I think we are now in sync

CJ Haughey

And as you have illustrated there senario 2 is why a customer can buy materials cheaper.

Stoner

I don't really want to get dragged into this, but.

if the 50 included vat and you charged them 60 , did you mark up the cost and vat , if you added ten euro to a cost that had vat on it and then added 30 euro labour bringing it to 90 then did you add vat again ? like your post seems to indicate or am I confused

this means one of two things

you mark materials up by over 40% and add VAT, all good that's your business

or

the customer was charged for VAT twice, as you could claim the vat on the 50 euro back but they can't.


cost and labour are best calculated ex VAT IMHO.

add your margin

add Vat at the appropriate rate/rates.

if it was 50 including VAT and you charged 60.

You get the VAT back on the 50

you effectively pay 40.65 for the materials, if you sold them at 60 you marked the goods up by 47% and then added VAT.

if that's the case the customer would as you say be better off getting the goods directly and paying the VAT upfront

ChippingSodbury

CJ, I'd love to see your VAT Returns :pac:

I do my VAT Returns via 2011's route!

2011

CJ Haughey wrote: »

And as you have illustrated there senario 2 is why a customer can buy materials cheaper.

Scenario 2 only applies to a VAT registered business, they pay €40.65 only because they can reclaim the VAT

Scenario 2 does not apply to the customer as he is not VAT registered so he pays the full €50

ChippingSodbury wrote: »

CJ, I'd love to see your VAT Returns :pac:

I do my VAT Returns via 2011's route!

...and mine have been audited.

CJ Haughey

Getting too caught up in vat which has led to confusion, possibly my bad. Mark up and profit should have been used more. Yes i mark up materials, yes its cheaper if a customer of mine went to a wholesalers and bought the material themselves.
It costs money to keep a van on the road, tools need to be constantly bought, insurance, etc. Something has to pay for that.
Working for a wage is a waste of time, if you are not making profit then its time to get out of business.

ChippingSodbury

I don't think anyone's begrudging you a profit. Your mark-up is based on an ex-VAT figure: you can decide yourself how much it's going to be.

Regarding VAT, as Fr Ted might say "The money was only resting in my account"!

ChippingSodbury

So did yer man get his shed wired or wha??

Stoner

OK enough about VAT.

its over please.