What is the "Plus VAT" amount in Contracting rate?

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

JamesFuller wrote: »

Hi all,



How can he claim the VAT on his £400 a day rate? Does he do this through his accountants?

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

isplumm

unforeseen wrote: »

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.

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

motorguy

Derwent wrote: »

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

Yes, that was subsequently elaborated on.

motorguy

unforeseen wrote: »

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.

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.

Chucky1234

Derwent wrote: »

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

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

motorguy wrote: »

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.

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.