What is the two-thirds rule ?

Goods are often supplied in the provision of a service, for example, parts in a cooker repair job.

There are certain rules in relation to how this transaction is taxed for Value-Added Tax (VAT) purposes.

If the cost of the goods used in carrying out the work exceeds two-thirds of the total price:

a) the rate which applies to the goods then applies to the entire transaction.

If the costs of the goods used in carrying out the work does not exceed two-thirds of the total price:

a) the rate which applies to the service then applies to the entire transaction.

This is known as the two-thirds rule.

But note the following services are not subject to the two-thirds rule:

1.Repair and maintenance of motor vehicles and agricultural machinery

2.Construction services where principal contractors account for VAT on the receipt of construction services from sub-contractors

3.Construction services between two connected parties.

Any queries on the above give me a call on 091 763817 or email me at oliver@taxreturnhelp.ie