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