Supplies of Goods & Services - FAQs
- I carry out repairs and supply parts in carrying out the repairs. Can you explain the Two Thirds Rule?
- What are Fourth Schedule services?
- Supplies of Goods Chapter 3 of the VAT Guide 2008
- Supplies of Services Chapter 4 of the VAT Guide 2008
I carry out repairs and supply parts in carrying out the repairs. Can you explain the Two-Thirds Rule?
If you are carrying out repairs, you will often need to supply some parts as well as labour. Generally, these parts are regarded as being part of the repair service, and there is no need to calculate the value of the goods or the rate of VAT on them separately. However, if the value (the cost to you excluding VAT) of the parts used in carrying out the repair exceeds two-thirds of the total (VAT exclusive) charge to your customer, then the rate of VAT that applies to the parts (normally standard) applies to the whole contract.
For example, say you are repairing a washing-machine that needs a new drum, and the VAT-exclusive cost to you of the drum is €201. If the total VAT-exclusive amount you charge your customer is €300, then the cost of the drum is more than two-thirds of the total charge, and the full amount of your bill is liable to VAT at the same rate as the supply of the drum; i.e. standard rate
In the same circumstances, if the VAT-exclusive cost of the drum is less than €200, then this is less than two-thirds of the total €300 VAT-exclusive charge to the customer, and the entire bill is liable at the rate that applies to the repair; i.e. reduced rate.
Fourth schedule services are so-called because they are listed in the Fourth Schedule to the VAT Act 1972 (as amended). They consist of services that are liable to VAT in the country where the customer is established (provided they have been supplied across international boundaries for the purpose of the customer's business).
The general rule for services is that they are taxable at the place where the supplier is established, or where the work is actually carried out. For example, a garage in Ireland carrying out repair work on a vehicle belonging to a U.K. haulage company will charge Irish VAT.
Where Fourth Schedule services are supplied to a VAT-registered customer established in another Member State of the E.U., the customer must account for VAT on the supply. For example, a consultant in Ireland providing services to a company in the U.K. will issue an invoice at zero percent VAT, and the customer in the U.K. will account for the VAT. The customer's U.K. VAT number should be included on the invoice.
Fourth schedule services are generally intellectual or intangible by nature ie consultancy services, banking, financial and insurance services. Services in the Fourth Schedule that are directly connected with property are liable to VAT where the property is located, regardless of where the supplier or the customer are established.
Further information is available in the Fourth Schedule Services Information Leaflet on the Revenue website.