Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@. Skimlinks & other affiliated links are turned on

Search
  • FIRST POST
    • JamesFuller
    • By JamesFuller 5th Dec 17, 10:02 PM
    • 64Posts
    • 55Thanks
    JamesFuller
    What is the "Plus VAT" amount in Contracting rate?
    • #1
    • 5th Dec 17, 10:02 PM
    What is the "Plus VAT" amount in Contracting rate? 5th Dec 17 at 10:02 PM
    Hi all,

    I am helping a friend where they are getting contracting offers, where some of the rates are £ + VAT.

    For example £400 + VAT per day

    What is the VAT amount when it comes to these contracting offers?
Page 1
    • stuartJo1989
    • By stuartJo1989 5th Dec 17, 10:23 PM
    • 298 Posts
    • 284 Thanks
    stuartJo1989
    • #2
    • 5th Dec 17, 10:23 PM
    • #2
    • 5th Dec 17, 10:23 PM
    VAT is 20% of the cost (per day).
    • motorguy
    • By motorguy 6th Dec 17, 1:14 PM
    • 15,826 Posts
    • 9,121 Thanks
    motorguy
    • #3
    • 6th Dec 17, 1:14 PM
    • #3
    • 6th Dec 17, 1:14 PM
    Hi all,

    I am helping a friend where they are getting contracting offers, where some of the rates are £ + VAT.

    For example £400 + VAT per day

    What is the VAT amount when it comes to these contracting offers?
    Originally posted by JamesFuller
    If hes VAT registered, he will get £400+VAT a day, if hes not VAT registered, he'll charge £400 a day.

    If hes VAT registered he'll have to pay the +VAT element to HMRC anyway.
    You are not special. You are not a beautiful and unique snowflake.
    • gettingtheresometime
    • By gettingtheresometime 6th Dec 17, 1:39 PM
    • 3,133 Posts
    • 7,318 Thanks
    gettingtheresometime
    • #4
    • 6th Dec 17, 1:39 PM
    • #4
    • 6th Dec 17, 1:39 PM
    Has your friend gone to see an accountant?
    Lloyds OD / Natwest OD / PO CC / Wescott / Argos Card cleared thanks to the 1 debt v 100 day challenge


    Next on the list - JD Williams
    • isplumm
    • By isplumm 6th Dec 17, 8:57 PM
    • 1,814 Posts
    • 765 Thanks
    isplumm
    • #5
    • 6th Dec 17, 8:57 PM
    • #5
    • 6th Dec 17, 8:57 PM
    Hi all,

    I am helping a friend where they are getting contracting offers, where some of the rates are £ + VAT.

    For example £400 + VAT per day

    What is the VAT amount when it comes to these contracting offers?
    Originally posted by JamesFuller
    Hi

    Remember that if your friend is going down the contractor route, most clients will expect him to have his own LTD company.

    Thanks Mark
    We’ve had to remove your signature. Please check the Forum Rules if you’re unsure why it’s been removed and, if still unsure, email forumteam@moneysavingexpert.com
    • JamesFuller
    • By JamesFuller 6th Dec 17, 9:11 PM
    • 64 Posts
    • 55 Thanks
    JamesFuller
    • #6
    • 6th Dec 17, 9:11 PM
    • #6
    • 6th Dec 17, 9:11 PM
    Hi all,

    He is going to be VAT registered.

    He is going to set-up a LTD company through which he will work.

    How can he claim the VAT on his £400 a day rate? Does he do this through his accountants?
    • sangie595
    • By sangie595 6th Dec 17, 10:50 PM
    • 4,199 Posts
    • 6,929 Thanks
    sangie595
    • #7
    • 6th Dec 17, 10:50 PM
    • #7
    • 6th Dec 17, 10:50 PM
    Is your friend incapable of signing up for an account and posting their own questions? For which the best answer is still that they should get proper professional advice. But if they need this much help from a forum through a third party, then they simply aren't fit to be a contractor yet.
    • motorguy
    • By motorguy 7th Dec 17, 9:15 AM
    • 15,826 Posts
    • 9,121 Thanks
    motorguy
    • #8
    • 7th Dec 17, 9:15 AM
    • #8
    • 7th Dec 17, 9:15 AM
    Hi all,

    He is going to be VAT registered.

    He is going to set-up a LTD company through which he will work.

    How can he claim the VAT on his £400 a day rate? Does he do this through his accountants?
    Originally posted by JamesFuller
    He cant "claim the vat" on his day rate, he'll have to charge it, then pass it on to HMRC every three months.

    As has been said, if he joins the VAT margin scheme, theres a smallish financial gain to be made each year.

    He really needs to be talking to his accountant about these things though.

    Have him have a look at https://forums.contractoruk.com/

    Theres lots of info on there.
    You are not special. You are not a beautiful and unique snowflake.
    • paddyrg
    • By paddyrg 7th Dec 17, 2:49 PM
    • 13,085 Posts
    • 11,151 Thanks
    paddyrg
    • #9
    • 7th Dec 17, 2:49 PM
    • #9
    • 7th Dec 17, 2:49 PM
    I'm afraid I'm rather with sangie here - setting up a limited company and registering for VAT aren't difficult but do come with real responsibilities which require them to pay proper attention. These questions suggest they need real professional advice direct from an accountant they pay for it from (free advice is worth every penny you pay for it).
    • motorguy
    • By motorguy 7th Dec 17, 4:44 PM
    • 15,826 Posts
    • 9,121 Thanks
    motorguy
    I'm afraid I'm rather with sangie here - setting up a limited company and registering for VAT aren't difficult but do come with real responsibilities which require them to pay proper attention. These questions suggest they need real professional advice direct from an accountant they pay for it from (free advice is worth every penny you pay for it).
    Originally posted by paddyrg
    I dont think anyone is saying otherwise, however it does no harm to have a view of the mechanics of it before approaching an accountant, which i would assume the O/Ps friend is going to do.

    Lots of info on the uk contractor forum as per the link above.
    You are not special. You are not a beautiful and unique snowflake.
    • Derwent
    • By Derwent 7th Dec 17, 6:14 PM
    • 546 Posts
    • 722 Thanks
    Derwent

    If hes VAT registered he'll have to pay the +VAT element to HMRC anyway.
    Originally posted by motorguy
    Not necessarily. He can register for the flat rate scheme and keep a portion of it. The rate varies depending on the type of work but can be as high as 16% - ie if you billed a customer for £1000 plus vat and were on the flat rate scheme at 12% then you’d pay HMRC £120 and keep £80 of the vat.


    https://www.gov.uk/vat-flat-rate-scheme/how-much-you-pay
    Its amazing how these banks can't even do simple calculations correctly..............
    • unforeseen
    • By unforeseen 7th Dec 17, 6:58 PM
    • 2,017 Posts
    • 2,545 Thanks
    unforeseen
    I hope he's not registering for Vat in the belief that it's extra 'free' money.

    If he goes flat rate then then unless his goods cost greater than 2% of his turnover he will be classed as a limited cost business and pay at 16.5%. I found in that situation the work required wasn't worth the effort so I deregistered.
    • isplumm
    • By isplumm 7th Dec 17, 8:59 PM
    • 1,814 Posts
    • 765 Thanks
    isplumm
    Hi all,



    How can he claim the VAT on his £400 a day rate? Does he do this through his accountants?
    Originally posted by JamesFuller
    Hi,

    I assume that you are talking about how to invoice the client?

    Create the invoice, have 1 line with the rate x no of days, then 1 line showing the vat at 20%, then 1 line showing gross amount.

    So something like:

    Net: 4 days at £400 = £1600.
    VAT @ 20% = £320.
    Gross = £1920.

    Thanks Mark
    We’ve had to remove your signature. Please check the Forum Rules if you’re unsure why it’s been removed and, if still unsure, email forumteam@moneysavingexpert.com
    • isplumm
    • By isplumm 7th Dec 17, 9:03 PM
    • 1,814 Posts
    • 765 Thanks
    isplumm
    I hope he's not registering for Vat in the belief that it's extra 'free' money.

    If he goes flat rate then then unless his goods cost greater than 2% of his turnover he will be classed as a limited cost business and pay at 16.5%. I found in that situation the work required wasn't worth the effort so I deregistered.
    Originally posted by unforeseen
    Hi

    The FRS is very easy - no need to keep receipts or anything, just once a quarter complete a simple form.

    But of course since HMRC changed the FRS not sure whether it is worth it any more. I used to make about £3 per £100 before the changes.

    Thanks Mark
    We’ve had to remove your signature. Please check the Forum Rules if you’re unsure why it’s been removed and, if still unsure, email forumteam@moneysavingexpert.com
    • motorguy
    • By motorguy 7th Dec 17, 10:05 PM
    • 15,826 Posts
    • 9,121 Thanks
    motorguy
    Not necessarily. He can register for the flat rate scheme and keep a portion of it. The rate varies depending on the type of work but can be as high as 16% - ie if you billed a customer for £1000 plus vat and were on the flat rate scheme at 12% then you’d pay HMRC £120 and keep £80 of the vat.


    https://www.gov.uk/vat-flat-rate-scheme/how-much-you-pay
    Originally posted by Derwent
    Yes, that was subsequently elaborated on.
    You are not special. You are not a beautiful and unique snowflake.
    • motorguy
    • By motorguy 7th Dec 17, 10:07 PM
    • 15,826 Posts
    • 9,121 Thanks
    motorguy
    I hope he's not registering for Vat in the belief that it's extra 'free' money.

    If he goes flat rate then then unless his goods cost greater than 2% of his turnover he will be classed as a limited cost business and pay at 16.5%. I found in that situation the work required wasn't worth the effort so I deregistered.
    Originally posted by unforeseen
    If hes billing £400 a day (which is at the lower end of the IT contracting scale) then if hes working more than 42ish weeks a year then he'll break the threshold anyway.
    You are not special. You are not a beautiful and unique snowflake.
    • Chucky1234
    • By Chucky1234 8th Dec 17, 1:46 PM
    • 180 Posts
    • 99 Thanks
    Chucky1234
    Not necessarily. He can register for the flat rate scheme and keep a portion of it. The rate varies depending on the type of work but can be as high as 16% - ie if you billed a customer for £1000 plus vat and were on the flat rate scheme at 12% then you’d pay HMRC £120 and keep £80 of the vat.


    https://www.gov.uk/vat-flat-rate-scheme/how-much-you-pay
    Originally posted by Derwent
    Just a small one, its worth pointing out that somebody on the FRS is required to pay VAT on gross amount. So in your example they would have to pay £144 and keep £56 of it.
    • Makkusu
    • By Makkusu 9th Dec 17, 8:33 AM
    • 94 Posts
    • 15 Thanks
    Makkusu
    If hes billing £400 a day (which is at the lower end of the IT contracting scale) then if hes working more than 42ish weeks a year then he'll break the threshold anyway.
    Originally posted by motorguy
    No he won’t, LCT introduces a concept of ‘Relevent Goods’ which by definition is extremely strict and almost impossible to reach the threshold of as a contractor. I can almost guarantee you the only relevant good you have on record is that pen you bought the other week for 99p... Regardless of the daily rate he will be 16.5% (15.5% for the first year don’t forget).

    If you are still paying your original %, be careful, you’ll get hit with a penalty soon.

    Profit at 16.5% is £200 per £100k of net invoices, up to you whether worth it or not.
    Last edited by Makkusu; 09-12-2017 at 8:36 AM.
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

2,793Posts Today

7,891Users online

Martin's Twitter