UK Repair Shop VAT: Labour vs Parts — What's Taxable and What Isn't

The VAT Question Every UK Repair Shop Faces#

Most UK repair shops register for VAT once they pass the £90,000 threshold (2025 rate). At that point, the immediate question is: how do I charge VAT on a repair job where some of the cost is parts and some is labour? The short answer: both are standard rated at 20% for VAT-registered UK repair businesses. When you supply a repaired device to a customer, HMRC treats it as a single standard-rated supply — the repair service — whether you separately quote labour and parts or provide a single price. There is no VAT exemption for repair labour in the way there is for certain other services. The confusion often arises from misunderstanding how repairs differ from construction services, where different rules apply to labour on residential properties.

How to Correctly Split Your Invoice#

While both labour and parts are standard rated, it's still good practice to itemise them on your invoice for transparency and for your own record-keeping. A well-structured repair invoice shows: labour (e.g., screen replacement service — £80 + VAT), parts (e.g., Samsung Galaxy S24 OLED screen — £45 + VAT), and any other charges (collection fee, etc.). The total VAT is 20% on the combined ex-VAT amount. Itemising also makes it easier to track your parts margin versus labour margin separately, which is valuable management information. In AskBiz, invoices are generated from job records and include itemised parts from the inventory system and labour from the job type pricing. The VAT is calculated correctly and synced to Xero for your VAT return.

Second-Hand Parts and VAT#

Some repair shops, particularly in the phone repair sector, use refurbished or second-hand components — screens recovered from scrap devices, for example. The VAT treatment of second-hand parts used in repairs is the same as new parts: they form part of a standard-rated supply. However, if you're buying and selling second-hand devices (not just using parts from them), you may be eligible for the VAT Margin Scheme, which allows you to pay VAT only on the margin rather than the full sale price. This is relevant for shops that buy broken phones, repair them, and resell — a different activity from simply repairing customer devices. If your business does both, you need to clearly separate the two activities in your accounting.

Warranty Repairs and VAT#

Warranty repairs — where you're repairing a device at no charge to the customer under your warranty terms — are still a taxable supply, but the consideration is zero (the customer pays nothing). This means no VAT is collected, but you can still reclaim input VAT on parts used. Record warranty repairs in your job management system with a zero-charge job record so your accounting accurately reflects the cost of warranty work. This is important at VAT return time: your output VAT is calculated on customer charges, and your input VAT on parts includes parts for warranty jobs. If warranty jobs aren't recorded, your input VAT claim is understated.

VAT on Deposits and Part-Payments#

When you take a deposit for a repair, the VAT point is triggered at the earlier of: the date the deposit is received, or the date a VAT invoice is issued. This means if you take a £50 deposit on a quoted £200 repair, you have a VAT liability on that £50 in the VAT period when it's received — even if the repair isn't complete until the next period. Most repair shops deal with this through monthly or quarterly VAT returns, and the timing difference typically averages out over a year, but it's worth knowing for cash flow planning. AskBiz records deposit dates and amounts and syncs to Xero so your VAT position is always accurate, including deposits received versus repairs completed.

Getting VAT Right with AskBiz and Xero#

The practical solution for UK repair shop VAT is a POS that generates VAT-compliant invoices and syncs revenue to accounting software that handles VAT returns. AskBiz generates invoices with VAT correctly calculated and separated, syncs each transaction to Xero with the correct VAT treatment, and produces reports your accountant needs at VAT return time. If you're currently generating invoices manually or using a spreadsheet, you're either spending unnecessary time on this or making errors that will surface in an HMRC enquiry. The combination of AskBiz and Xero handles UK repair shop VAT correctly without requiring you to be a tax expert. AskBiz manages repair jobs end-to-end with VAT-compliant invoicing. Try free at askbiz.co

• UK repair shop VAT is straightforward once you understand the principles: labour for repairs is standard rated at 20%, parts supplied as part of a repair are also standard rated, but there are nuances around mixed supplies and second-hand parts that matter for your VAT return.