VAT on garage work in Ireland: 13.5%, 23%, and the two-thirds rule

Most Irish garages sell two things on one invoice: labour and parts. They do not carry the same VAT rate, and the rule that decides which applies is the one that gets half-remembered at the counter. Here is what actually applies.

A repair is one supply, not two

When you repair a car, Revenue treats the whole thing as a single supply of a service. Labour and the parts you fitted as part of that repair both go out at the 13.5% reduced rate. You do not split the invoice and charge the parts at 23% because you bought them as goods.

That is why a job sheet with €400 of labour and €600 of fitted parts is a €1,000 repair at 13.5%, not a mixed-rate document.

A counter sale is a different animal

Sell a battery, wiper blades or a bulb to someone who fits it themselves and you have supplied goods. That is the standard 23% rate. The same part, on the same shelf, carries a different rate depending on whether your technician fitted it.

This is the line that costs money when it blurs. A garage that puts everything through at 13.5% because "it's all parts anyway" is under-declaring on every counter sale; one that puts everything through at 23% is overcharging its repair customers and losing work on price.

The two-thirds rule, and why repairs escape it

The two-thirds rule says that where the cost of the goods in a supply exceeds two-thirds of the total price you charge, the whole supply takes the goods rate rather than the services rate. On the face of it that would drag any parts-heavy job up to 23%.

It does not, because Revenue operates a long-standing concession for motor repair work: a repair stays at 13.5% even where the parts dominate the price. A clutch job where the kit is most of the invoice is still a 13.5% repair.

Where the rule still matters is work that is not really a repair — a supply-and-fit that is mostly supply, with nominal labour attached to make it look like a service. If the labour is a token line on a job that is essentially selling a part, the rate follows the goods.

Test fees, courtesy cars and the odds and ends

NCT and CVRT fees paid to the test centre and passed on at cost are disbursements. You are collecting money on the customer's behalf, so no VAT goes on top. Mark the fee up, or fold it into one all-in price, and that treatment stops applying to it.

A courtesy car charged for is a hire of goods at 23%. Given free with a repair, there is nothing to charge.

Sundries and consumables — cleaner, lubricant, a percentage workshop charge — belong to the repair they were consumed on, so they take the repair's rate.

Getting it right without thinking about it

None of this is difficult. It is just easy to get wrong at half four on a Friday, one line at a time, on an invoice typed by hand. The practical fix is to let the system carry the rule: the rate belongs to the line, decided by what the line is, not chosen per invoice by whoever is at the desk.

That is how invoicing in MechIQ works — per-line VAT, with fitted parts following the repair and counter sales standing on their own — and it is why the figures reconcile when they reach Sage, Xero or QuickBooks rather than being re-keyed and re-argued.

Common questions

What VAT rate applies to a car repair in Ireland?

13.5% on the whole repair — labour and the parts fitted as part of that repair. Revenue treats a repair as a single supply of a service, so the parts follow the service rate rather than being split out at 23%.

Do parts get charged at 23% or 13.5%?

It depends on whether you fitted them. Parts fitted as part of a repair go at 13.5% with the labour. Parts sold over the counter, with no work done, are a supply of goods at 23%.

What is the two-thirds rule?

Where the cost of the goods in a job exceeds two-thirds of the total price, the whole supply is charged at the goods rate instead of the services rate. Revenue's concession for motor repairs means it does not apply to ordinary repair work, which is why a job with an expensive part still goes out at 13.5%.

How is the NCT fee treated?

An NCT fee paid to a government test centre and passed on at cost is a disbursement, not part of your supply, so no VAT is added. If you mark it up or fold it into a single price, that treatment no longer holds.