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blue2
Guest
Can someone please tell me about the two-thirds rule in vat and how to work out on a calculator if it exceeds the two third rule.
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blue2
Guest
Thanks Clubman
Can you also tell me how to work out two-thirds of something on a calculator
Can you also tell me how to work out two-thirds of something on a calculator
This basically means that if the cost of the materials in a job exceeds 2/3 of the VAT excl price to the customer then the standard 21% rate will apply and not the reduced 13.5% rate. It's to stop a situation where, say, you have a repair job replacing a burner on a heating system. The burner costs 200+VAT. The labour charge is say 50 + VAT, if you apply 13.5% to the total in that case, the person billing the work gets back more VAT than they pay.
You need to take (a) the cost of materials, add (b) the labour charge and see if (a) / (a)+(b) > 66.67%. In the above example 200/(200+50) = 80% which > 66.67% so in that case the job should be charged at 250+21% VAT.
From
[broken link removed]
17.4 The rate of VAT applying to services, including building services, depends on the “two-thirds" rule. This provides that a transaction is liable to VAT as a sale of goods at the appropriate rate and not as a service, if the value of the goods used in providing the service, that is their cost excluding VAT to the service contractor, exceeds two-thirds of the total VAT exclusive charge to the customer.
The “two-thirds" rule does not usually affect building services in which the labour element is substantial. It would be likely to come into operation in the case of a service consisting of the supply and installation of, say, a transformer or a strong room. The possibility of its application should never be overlooked and contractors should consult the local inspector of taxes if there is any doubt about the correct liability to tax. Sub-contractors, in particular, may find that the 21% rate may apply to their portion of a main contract even though the main contract may itself be liable at the 13.5% rate.
You need to take (a) the cost of materials, add (b) the labour charge and see if (a) / (a)+(b) > 66.67%. In the above example 200/(200+50) = 80% which > 66.67% so in that case the job should be charged at 250+21% VAT.
From
[broken link removed]
17.4 The rate of VAT applying to services, including building services, depends on the “two-thirds" rule. This provides that a transaction is liable to VAT as a sale of goods at the appropriate rate and not as a service, if the value of the goods used in providing the service, that is their cost excluding VAT to the service contractor, exceeds two-thirds of the total VAT exclusive charge to the customer.
The “two-thirds" rule does not usually affect building services in which the labour element is substantial. It would be likely to come into operation in the case of a service consisting of the supply and installation of, say, a transformer or a strong room. The possibility of its application should never be overlooked and contractors should consult the local inspector of taxes if there is any doubt about the correct liability to tax. Sub-contractors, in particular, may find that the 21% rate may apply to their portion of a main contract even though the main contract may itself be liable at the 13.5% rate.
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blue2
Guest
thank you very much for all your help guys 
Really is a great help
Really is a great help
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picasso
Guest
Would the 2/3 rule apply to the supply and fitting by a plumber of a washing machine, where he has included a mark up in the machine?
See [broken link removed], in particular section 6 on page 4+5 "Fittings".
Fittings such as washing machines even if plumbed are a supply of goods at 21%. The mark-up on a washing machine is included in profit at 21%. This is no different to that as would apply if the W/M was purchased in a shop. If one charge for the supply and plumbing of the W/M was made then that is all at 21%. However it is open to the plumber to raise a separate charge for the plumbing and charge at 13.5% for that separate charge. ( see the example of the electrician in the Revenue leaflet referred)
Sorry to dig this up, but I wasn't 100% sure about the following scenario:
Fixing of a desktop computer and installation of new hard disk drive.
Hard drive = 50 EUR ex VAT
Labour (@13.5%) = 100 EUR ex VAT
Which one of the following (if not all of them) can be applied ...
1x invoice for 150.00 + [email protected]%
1x invoice for (50.00 + VAT@21%) + (100.00 + [email protected]%)
2x invoices (1x for 50.00 + VAT@21%) + (1x for 100.00 + [email protected]%)
This actually brings up another VAT-related question... If the labour consists of both hardware repair and software repair (in this case re-installation of operating system and drivers), would I need to split the billable hours into software and hardware repair since software repair seems to be rated at 21%? In a case like this, I wouldn't literally be repairing (programming) or supplying the software, but rather returning the computer to a functioning state as a whole unit...
Apologies if my second question is off-topic.
Fixing of a desktop computer and installation of new hard disk drive.
Hard drive = 50 EUR ex VAT
Labour (@13.5%) = 100 EUR ex VAT
Which one of the following (if not all of them) can be applied ...
1x invoice for 150.00 + [email protected]%
1x invoice for (50.00 + VAT@21%) + (100.00 + [email protected]%)
2x invoices (1x for 50.00 + VAT@21%) + (1x for 100.00 + [email protected]%)
This actually brings up another VAT-related question... If the labour consists of both hardware repair and software repair (in this case re-installation of operating system and drivers), would I need to split the billable hours into software and hardware repair since software repair seems to be rated at 21%? In a case like this, I wouldn't literally be repairing (programming) or supplying the software, but rather returning the computer to a functioning state as a whole unit...
Apologies if my second question is off-topic.