• “Two-Thirds Rule”, “Multiple Supply”, “Composite Supply”
The “Two-Thirds Rule”: 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; 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.
Example (services taxable at the rate of goods):
Guitar repair job, quoted price of €300 plus VAT
Made up as follows:
Cost of materials at 23% (VAT exclusive) €220
Labour, overheads, profit €80
Cost of materials €220 (VAT exclusive) exceeds 2/3rds of full price (VAT exclusive)
VAT chargeable is €69 (€300 × 23%)
A “Multiple Supply” is where each of the items being sold together for one consideration is capable of being supplied independently in its own right. This means that each part of the supply is physically and economically dissociable from the other parts of the supply. The consideration for a multiple supply must be apportioned between each of the individual supplies for the purposes of charging VAT.
A car repair service is provided at the same time as the fitting of a set of tyres for a single consideration. As the supply of car tyres does not normally form part of a routine car service, the repair service and the supply of tyres would be regarded as a multiple supply. Both supplies are physically and economically dissociable from each other. In these circumstances the consideration should be apportioned so that the service is taxed at the reduced rate and the tyres at the standard rate.
A “Composite Supply” means a supply comprising two or more supplies of goods and/or services made in conjunction with each other, where one of the supplies is a principal supply, and the other supplies are ancillary supplies. In general, the total consideration for a composite supply is chargeable to VAT at the rate applying to the predominant element.
The purchase or lease of computers programmed to perform a specific function coupled with specific training on how to operate and access the system as an integral part of the overall deal. The leasing of the equipment (the standard rate of VAT) is the principal supply and the provision of the training (exempt from VAT) is ancillary. Accordingly, the standard rate will apply to the overall transaction.
I hope I was helpful.