Wiring Query

2011

CJ Haughey wrote: »

Post 7 would be a vat reg rec

Fair enough, then this calculation applies and there would be a saving of just €9.25 as explained here.

my previous post would be a non vat rec.

Ok so if the customer manages to find a non-VAT registered REC that applies a 10% mark up on materials then the additional cost is just that, 10%.

Either way your calculation in post 7 does not make sense.

CJ Haughey

We have conflicting theories here. Say for example a customer walks in off the street and purchases a light fitting for €100 that will include 23% vat.
An electrician buys the same product for €85 give him a trade price and that includes 23% vat.

So that is costing electrician €70, now according to you all he adds on is 13.5% so that is €79.

Unless im reading your posts wrong this is your theory on vat, is the above you concur with?

2011

CJ Haughey wrote: »

Say for example a customer walks in off the street and purchases a light fitting for €100 that will include 23% vat.

Ok, so €100 would be equal to €81.30 + VAT @23%

An electrician buys the same product for €85 give him a trade price and that includes 23% vat.

OK, so €85 would be equal to €69.11 + VAT @23%

So that is costing electrician €70, now according to you all he adds on is 13.5% so that is €79.

I am saying that for most work that a REC carries out the "two thirds rule" can be applied, meaning that the lower 13.5% VAT rate can be charged.
Michael Noonan explains it here.

You refer to the 13.5% VAT rate yourself in post 7.

CJ Haughey

2011 wrote: »

Ok, so €100 would be equal to €81.30 + VAT @23%



OK, so €85 would be equal to €69.11 + VAT @23%

Yes and Yes

So to answer my question,

Unless im reading your posts wrong this is your theory on vat, is the above you concur with?

2011

CJ Haughey wrote: »

So to answer my question,

I thought I answered it.
Please rephrase and I will try again.

Edit:
Generally the lower 13.5% VAT rate will apply to electrical installation work (including materials) as you have alluded to in post7.
I just disagree with your maths in that post.

From the Micheal Noonan link above:

In addition, where a building contractor carries out home improvements and the materials cost does not exceed two-thirds of the cost of the improvements then the reduced rate of 13.5% applies to the total building service. A consequence of this is that a VAT registered building contractor will generally be entitled to recover VAT at the 23% standard rate on most building materials purchased while the contractor is only liable to charge VAT at the 13.5% reduced rate on the supply to the home owner.

CJ Haughey

2011 wrote: »

I thought I answered it.
Please rephrase and I will try again.

Even though the electrician in my last example can claim 23% vat on the item he would be a busy fool selling it on cheaper to the customer than what the customer can walk in off the street can.
Just beacuse an rec can claim 23% vat on an item does not mean he has to pass on that saving minus 13.5%.

2011

CJ Haughey wrote: »

Even though the electrician in my last example can claim 23% vat on the item he would be a busy fool selling it on cheaper to the customer than what the customer can walk in off the street can.

I never suggested that an electrician should pass on the full saving to the customer.
I used the 10% mark up figure that you provided (post 7) in my calculation.
This showed a €9.25 saving to the customer not the €124 saving that you suggested in post 7.

Just beacuse an rec can claim 23% vat on an item does not mean he has to pass on that saving minus 13.5%.

The REC is permitted to incentivise the customer by charging a lower VAT rate on the entire job (materials and labour) at no cost to himself (see post 34).

CJ Haughey

Were still not hymning off the same hymn sheet, i understand the 2/3rds rule on vat that is not relevant nor noonans link alot he knows but that a different story.
You buy an item from your wholesalers it costs you €100 inclusive of 23% vat, what do you charge the customer for the item final figure including 13.5% vat (lets just use 13.5%).

2011

CJ Haughey wrote: »

You buy an item from your wholesalers it costs you €100 inclusive of 23% vat, what do you charge the customer for the item final figure including 13.5% vat (lets just use 13.5%).

€100 would be equal to €81.30 + VAT @23%

So the contractor can sell this on to the customer at €81.30 + VAT@ 13.5% at no loss to himself as part of an overall bill if the two thirds rule applies.
In this example the customer that can not reclaim VAT makes a saving on the item (due to being charged the lower VAT rate) and this part of the transaction is cost neutral to the contractor.



Edit:
€81.30 + VAT@ 13.5% = €92.28

CJ Haughey

Why would you sell the item less than what the customer walking in off the street buys it for though, last time i did that years ago when i used do water pumps i learned my lesson.

2011

CJ Haughey wrote: »

Why would you sell the item less than what the customer walking in off the street buys it for though, last time i did that years ago when i used do water pumps i learned my lesson.

I explained in my last post the amount that would have to be charged to be cost neutral, so anything charged above that is profit.

You can apply any mark up you like, that is your choice.
But whatever you charge the maths has to "work".
It post 7 it doesn't

CJ Haughey

2011 wrote: »

It post 7 it doesn't

What do you disagree with in post 7, i know you might have said earlier so apologies for that.

2011

CJ Haughey wrote: »

What do you disagree with in post 7, i know you might have said earlier so apologies for that.

The customer saving €124 saving on materials.
If you still think that this is correct show me the calculation.

CJ Haughey

I think i see the confusion by me, bear with me.

CJ Haughey

In post 7 where i said

Say customer got €500 for material quote, the electrician got similar but after adding on his margin (10%) plus 13.5% vat = €624.

I should have said the €500 was including 23% vat, so the materials were costing him €406.

2011

CJ Haughey wrote: »

In post 7 where i said



I should have said the €500 was including 23% vat, so the materials were costing him €406.

Ok so based on that and the electrician making 10% work out the cost saving for the customer.

CJ Haughey

2011 wrote: »

Ok so based on that and the electrician making 10% work out the cost saving for the customer.

Its €124 as per post 7 the saving the customer can get.

2011

CJ Haughey wrote: »

Its €124 as per post 7 the saving the customer can get.

Ok, go through the maths step by step (as I did) and I will show you where your calculation is going wrong.

Stoner

Vat is only charged once, paid by the end user.

CJ Haughey

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. This wholesalers is open to public along with trade.
I charged the customer €60 for the light and €30 for labour. I added vat only once @13.5% and charged the customer €102.
According to 2011 if he were invoicing he would only be €48 for that same light (€60 minus 23% vat).

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.