VAT RATES + LABOUR QUESTION FOR INVOICE

TECH85

Hey ,

So im in the process of setting up ltd company and registering for vat etc..

Been doing some research about rates , vat and how to invoice etc .
So i just came across this , is it right?
Shouldnt the "additional time" be 13.5% ?

Tbw this is from onlinetradesmen.ie
So in general your emergency plumber price will look something like the following:

Plumber Price Quote = (First hour / Callout fee )) + 13.5% VAT) + (Additional Time + 23% VAT) + (Plumbing Parts + 23% VAT)


This is how i thought it should be done !
Example .

Labour 100 + 13.5% vat = 113.50
Parts 20 + 23% vat = 24.60
Total = 138.10

TIA

dbran

Hi there

If the cost price of the goods is more then 2/3s of the overall price then the rate of vat that applies is the vat on the goods ie 23%.

if the cost price of the goods is less then 2/3s of the overall price then the rate of vat that applies is the vat on the service ie 13.5%. You do not apportion out the underlying goods/service.

In you example the rate of vat that is applicable is 13.5% on the entirity.

Best regards

dbran

TECH85

Hi

Thanks for your reply !

I may be wrong but i thought the 2/3 s rule doest apply to certain industries , like construction ?!?

secman

Rct rule takes precedence over two thirds rule when it's deemed a "relevant contract".
That's when it involves a main contractor and a subcontractor. If you are invoicing joe public the two thirds rule applies.

the_pen_turner

dbran wrote: »

Hi there

If the cost price of the goods is more then 2/3s of the overall price then the rate of vat that applies is the vat on the goods ie 23%.

if the cost price of the goods is less then 2/3s of the overall price then the rate of vat that applies is the vat on the service ie 13.5%. You do not apportion out the underlying goods/service.

In you example the rate of vat that is applicable is 13.5% on the entirity.

Best regards

dbran

are you saying that any mark ups,profit ,delivery charges, that are added to the materials cost to get the billable price forthe materials should not be included as part of the 2/3 rule

so , if i buy 200 euros worth of materials ex vat
if i charge the customer materials charge (cost + delivery +mark up+profit) say +30 %
so thats 260euro ex vat.
if my labour is 120 ex vat
so materials charge is higher than 2/3s rule.
but materials cost is not

dbran

the_pen_turner wrote: »

are you saying that any mark ups,profit ,delivery charges, that are added to the materials cost to get the billable price forthe materials should not be included as part of the 2/3 rule

so , if i buy 200 euros worth of materials ex vat
if i charge the customer materials charge (cost + delivery +mark up+profit) say +30 %
so thats 260euro ex vat.
if my labour is 120 ex vat
so materials charge is higher than 2/3s rule.
but materials cost is not

No it is the cost of the material alone.You cannot inflate it to allow the lower charge to VAT.

dbran

the_pen_turner

dbran wrote: »

No it is the cost of the material alone.You cannot inflate it to allow the lower charge to VAT.

dbran

its no inflating the cost to change the vat rate,
what I was asking is it the ex vat price you paid from your supplier that you use to work it out or is it the total cost of materials including mark ups, delivery ,profit etc

dbran

Its the ex vat price paid to your supplier of the materials alone. No markup, labour delivery charge or other add ons etc

K.Flyer

What you pay for your goods and what you charge your customers are two different things.
For invoicing it is what You are charging your customers for the goods and service supplied.
For example..

Goods 100.00
Labour 100.00
Net= 200.00
Vat is 13.5%

Goods 210.00
Labour 100.00
Net = 310
Vat is 23% because the value that you put on the goods to customer is over two thirds of net price.

It is the value that you put on the goods on invoicing, not what you paid for them, dictates the vat rule. If you get an item for free and you decide to use it on a job and want to charge for it, the same rule applies.

If you are subcontracting on RCT the rule changes in that you do not apply vat to your invoice. Your accountant should be able to explain this in better detail as well as clarifying the above.
Good luck in your new venture.

dbran

K.Flyer wrote: »

What you pay for your goods and what you charge your customers are two different things.
For invoicing it is what You are charging your customers for the goods and service supplied.
For example..

Goods 100.00
Labour 100.00
Net= 200.00
Vat is 13.5%

Goods 210.00
Labour 100.00
Net = 310
Vat is 23% because the value that you put on the goods to customer is over two thirds of net price.

It is the value that you put on the goods on invoicing, not what you paid for them, dictates the vat rule. If you get an item for free and you decide to use it on a job and want to charge for it, the same rule applies.

If you are subcontracting on RCT the rule changes in that you do not apply vat to your invoice. Your accountant should be able to explain this in better detail as well as clarifying the above.
Good luck in your new venture.

I would disagree, it is the cost that you incur for the materials and not merely the amount that you put on the invoice.

http://www.revenue.ie/en/vat/vat-on-services/services-taxable-at-the-rate-of-the-goods-the-two/index.aspx

Where the VAT exclusive cost of goods used in the provision of a service does not exceed two-thirds of the total VAT exclusive price then the full price is taxable as a supply of services. This is known as the two-thirds rule.

If what you re saying were true than it would be very easy to arrange for all of the vat to be charged at 13.5% by manipulating the invoice by making it so that the goods were supplied at below cost.

A sale that is essentially really a supply of goods could then be manipulated so that it is a supply of services and instead of 23% VAT only 13.5% vat would apply.

dbran

K.Flyer

dbran wrote: »

If what you re saying were true than it would be very easy to arrange for all of the vat to be charged at 13.5% by manipulating the invoice by making it so that the goods were supplied at below cost.

A sale that is essentially really a supply of goods could then be manipulated so that it is a supply of services and instead of 23% VAT only 13.5% vat would apply.

dbran

Yes it would be possible to play with figures as you say, however it can come back on you either while doing your assessment or an audit.
Regarding the two thirds rule, I have been s.e. for almost 30 years, and have been through a few different accountants, and they each explained the 2/3 rule as I did above.
In your revenue link the wording is "cost of goods" this is cost of goods to the customer, not what you as a supplier paid for them.
As a supplier of goods and services, you are entitled to make a profit or have a mark up on goods supplied, it is the price you charge these goods on to the customer that is shown on your invoice and consequently dictates the vat.
If you bought the item for a euro, but are selling it for ten euro and charging labour, you don't put goods = 1 euro on the invoice.
No invoice or receipt shows what the suppliers paid for the item.

Edit: from your revenue link..

Where the Value-Added Tax (VAT) exclusive cost of goods used in the provision of a service exceeds two-thirds of the total VAT exclusive price you charge to your customer then the full price is taxable at the rate of the goods.

Couldn't be clearer, says nothing about what you paid for the goods, only what you are charging the customer for them. On the presumption that you are not charging below cost price, unless for a valid reason e.g. a warranty replacement.

exaisle

TECH85 wrote: »

Hey ,

So im in the process of setting up ltd company and registering for vat etc..

Been doing some research about rates , vat and how to invoice etc .
So i just came across this , is it right?
Shouldnt the "additional time" be 13.5% ?

Tbw this is from onlinetradesmen.ie
So in general your emergency plumber price will look something like the following:

Plumber Price Quote = (First hour / Callout fee )) + 13.5% VAT) + (Additional Time + 23% VAT) + (Plumbing Parts + 23% VAT)


This is how i thought it should be done !
Example .

Labour 100 + 13.5% vat = 113.50
Parts 20 + 23% vat = 24.60
Total = 138.10

TIA

With all due respect to the responders to your original post, the best advice I can give is to engage the services of an accountant! This is really the time to set up systems to ensure that you operate within tax law so that you don't incur (what can be quite heavy) penalties later on due to lack of knowledge or expertise.
A decent accountant will also get you into the habit of making timely tax returns. Paying a little often, in my experience, beats the hell out of a big shock once a year!

Easy to teach a new dog new tricks...

exaisle

K.Flyer wrote: »

Couldn't be clearer, says nothing about what you paid for the goods, only what you are charging the customer for them. On the presumption that you are not charging below cost price, unless for a valid reason e.g. a warranty replacement.

Where the Value-Added Tax (VAT) exclusive cost of goods used in the provision of a service exceeds two-thirds of the total VAT exclusive price you charge to your customer then the full price is taxable at the rate of the goods.

No invoice or receipt shows what the suppliers paid for the item.



I'm afraid that you're wrong.

"Cost" and "Price" are two different things. "Cost" is the cost to the contractor. "Price" is the price charged to the customer.

This HAS to be the case, because otherwise, the price charged to the customer is liable to "manipulation".

The idea here is to ensure that you don't, for example, buy a TV for €500 plus 23% VAT and supply and fit it to your pal's wall, charging him €510 plus 13.5%, saving him €26.15 in the process and getting a VAT refund of €36.15 for yourself.

There is no obligation to show the cost of items supplied separately. What a contractor charges for materials is his busiess, as is the calculation of VAT, it's not the recipient's. The invoicer/contractor is the one responsible for the payment of VAT to revenue.

K.Flyer

exaisle wrote: »

I'm afraid that you're wrong.

"Cost" and "Price" are two different things. "Cost" is the cost to the contractor. "Price" is the price charged to the customer.

This HAS to be the case, because otherwise, the price charged to the customer is liable to "manipulation".

The idea here is to ensure that you don't, for example, buy a TV for €500 plus 23% VAT and supply and fit it to your pal's wall, charging him €510 plus 13.5%, saving him €26.15 in the process and getting a VAT refund of €36.15 for yourself.

There is no obligation to show the cost of items supplied separately. What a contractor charges for materials is his busiess, as is the calculation of VAT, it's not the recipient's. The invoicer/contractor is the one responsible for the payment of VAT to revenue.

I am not wrong, what they cost me is one thing, what I charge the customer is different, with or without mark up, but not less than what they cost me, unless its a warranty issue.
I have never been pulled up by accountants or revenue over my invoicing.
But let the o.p get an accountant to explain it to him.
/

the_pen_turner

K.Flyer wrote: »

exaisle wrote: »

I'm afraid that you're wrong.

"Cost" and "Price" are two different things. "Cost" is the cost to the contractor. "Price" is the price charged to the customer.

This HAS to be the case, because otherwise, the price charged to the customer is liable to "manipulation".

The idea here is to ensure that you don't, for example, buy a TV for €500 plus 23% VAT and supply and fit it to your pal's wall, charging him €510 plus 13.5%, saving him €26.15 in the process and getting a VAT refund of €36.15 for yourself.

There is no obligation to show the cost of items supplied separately. What a contractor charges for materials is his busiess, as is the calculation of VAT, it's not the recipient's. The invoicer/contractor is the one responsible for the payment of VAT to revenue.

I am not wrong, what they cost me is one thing, what I charge the customer is different, with or without mark up, but not less than what they cost me, unless its a warranty issue.
I have never been pulled up by accountants or revenue over my invoicing.
But let the o.p get an accountant to explain it to him.
/

It's a very grey area.
What my supplier charges isn't the same as what supplying the materials cost me. The materials cost to the customer is going to include delivery, mark up, profit.
Which value should be use d to work out the VAT rate.
I use the all include value as my materials. Value working it out

exaisle

K.Flyer wrote: »

I am not wrong, what they cost me is one thing, what I charge the customer is different, with or without mark up, but not less than what they cost me, unless its a warranty issue.
I have never been pulled up by accountants or revenue over my invoicing.
But let the o.p get an accountant to explain it to him.
/

We'll have to agree to differ, although the thought occurs to me, that if the amount charged includes a markup, and you're complying with the 2/3rds rule, you'd be complying with it without the markup too. :-)

K.Flyer

exaisle wrote: »

We'll have to agree to differ, although the thought occurs to me, that if the amount charged includes a markup, and you're complying with the 2/3rds rule, you'd be complying with it without the markup too. :-)

Exactly, it comes down to what the goods price value to the customer is in the invoice net total amount that will dictate the rate of vat that has to be applied.
If the goods value, whether you have a mark up or not, exceeds 2/3rds of the net invoice total, then 23% applies.
Yes, I agree, because there is no obligation to provide the goods value on an invoice some will apply the incorrect vat and do manipulate the numbers. But we are not discussing that aspect.

TECH85

Hey

Thanks all for the info and advice , good and bad much appreciated !!
I have an accountant and just in the process of getting things set up atm !
I will be going through the invoicing details soon to learn the best way of keeping track of everthing.
Just said i would start a thread to set what other people do when doing their invoices , it has turned into an interesting thread all the same , ha

Cheers

Turnstyle

K.Flyer wrote: »

Exactly, it comes down to what the goods price value to the customer is in the invoice net total amount that will dictate the rate of vat that has to be applied.
If the goods value, whether you have a mark up or not, exceeds 2/3rds of the net invoice total, then 23% applies.
Yes, I agree, because there is no obligation to provide the goods value on an invoice some will apply the incorrect vat and do manipulate the numbers. But we are not discussing that aspect.

VAT guide, section 4.2 page 39, clearly refers to the cost to the contractor for materials: http://www.practicenet.ie/businessguides/vatguide_2008-1.pdf

A worked example illustrates how this plays out for a customer:


Example 1:

Materials cost 500
Labour 300
Net invoice total 800

2/3 test 63%

__________________________________________

Example 2

Materials (Marked up 25%) 625
Labour (same) 300
Net invoice total 925

2/3 test 68%

VAT @ 13.5% based on
example 1 above 125

Total 1,050


If we applied your understanding, you will charge VAT at 23% (€213) and charge the customer a total of €1,138, overcharging them by €88 and making your service less competitive.