Autumn Statement 2016

[pr1]

Well, this new 16.5% VAT rate will mean they trouser less from virtually all of the contractors that work in the City Of London where the business's cannot claim back VAT

as long as you turnover less than 81k though?

[jamesbrown]

This will affect anyone whose expenditure largely consists of services rather than goods.

Either way, we're going to lose out but I'm more annoyed about the additional burden. The FRS is simple. We always needed to keep receipts or some other evidence of our expenditure but now we need to make sure we have a valid VAT receipt for everything in order to reclaim the VAT, including for all the little bits related to travel and subsistence. We didn't need to worry about apportioning VAT reclaims for any personal use and now we do.

And probably because of the twats pushing schemes that genuinely take advantage of the FRS like this:
http://forums.contractoruk.com/accou...-millions.html

Yes, ignore my previous comments. I understand your pain

[westtester]

For anyone who wants to see how much this affects their income.

Flat Rate VAT Calculator

[WarringtonContractor]

query

Slight? I wouldn't call a reduction of over £2k for somebody on £100k turnover slight.

At the new rate on a £100k turnover you would make £200 in flat-rate surplus income.

How much input VAT did you pay on your expenses last year? I must have paid more than £200 in VAT on my accountancy fees alone.

My expenditure on goods is near to zero - that makes me a "low cost" trader according to the new FRS test as most of my expenses are on services (accountancy fees, travel, web hosting, software etc.). Remaining on the FRS would probably cost me about £1k a year at least and I imagine many other contractors will be in the same position.

If you earn/bill £100,000 and charge 20% VAT (£20,000), then you pass back to HMRC £14,500, leaving £5,500, after corp tax that's £4,400, not £2400

sorry if I am being stupid,

[jonnyboy]

So, that didn't take long for the waves to go up and come down in the place that I am currently working... just got an email from my budget paying head manager, where they are offering to compensate me for the budget changes after 1st April. Not sure if I have everything right in my mind with the recent changes.

Currently, I am working in a PS contract, with my own Ltd company doing a fair chunk of Freelance work as well. My company is NOT on the FRS. my contract is in London, and I am claiming travel costs via my company to get to my FS client when I have to travel in to London (other times I can dial in from home). So assume this all goes ahead (I assume IPSE and others will now wake up from there long term slumber and actually start some fight/appeal action), come april I am bang, inside IR35. I assume...

1) I cant come up with some clever 'doing this project at fixed rate' solution to avoid the bum on seat inside IR35 thing?
2) I have to now pay travel personally?
3) I will be taxed at full whack (employee and employer full tax) by the agency, with no dividends possible from my company (only from the freelance work)

The boss man is offering to drop his pants and pay me so I not out of pocket, but I dont even know how I would go about working out what the balance day rate would need to be so I am not out of pocket. The other thing to do is end my contract at xmas (thats the next break point) and look for a private gig, but I assume there will be 40,000 other contractors looking to do the same.

Any tips?

[MrMarkyMark]

as long as you turnover less than 81k though?

I turnover half again over that figure, on a good year.
I suspect a lot of others do the same.

[d000hg]

Are we really that optimistic to think the government will reduce CT without a corresponding increase in the dividend tax?

I haven't read the thing yet but the government have been working on reducing CT for a number of years, I don't think that's a trick.

Re: FRS VAT:

At best, it will wipe out the profit many of us make from the FRS. At worst it might force a few people off the scheme and onto the standard scheme but it remains to see how this will work in practice.

Lets wait and see what they define as "limited costs" because I'm sure most of us have a higher than 1% expenses to turnover ratio! My admin costs are typically around 5-10% of turnover.

If you are paying ~£100pcm for your accountancy then doesn't that mean the 1% threshold is £10k sales per month?

However I haven't seen where this 1% comes from. I get there's a change to VAT rates and FRS but not who it applies to or what criteria?

I don't actually need to be on VAT at all and consider making profit from FRS a little bizarre however I can't see any reason de-registering for VAT would ever be beneficial, right? I know lots fo 1-man-bands never bother but is that just laziness?

[TheCyclingProgrammer]

For anyone who wants to see how much this affects their income.

Flat Rate VAT Calculator

Its simple enough to work out without a calculator:

* Do you pass the new test for a low cost trader? Unless you spend significant amounts on goods, the answer for most of us is likely to be yes.

* Do you spend more than a grand a year on services? Given that most of us probably pay around that much for an accountant alone, let alone travel, subsistence, equipment and other service costs, the answer is also likely to be yes.

If you answered yes to both of the above, you'll make a loss on the FRS at 16.5%.

[FarmerPalmer]

"The tax system needs to keep pace. For example, the OBR has today highlighted the growing cost to the Exchequer of incorporation.

So the government will consider how we can ensure that the taxation of different ways of working is fair between different individuals, and sustains the tax-base as the economy undergoes rapid change.

We will consult in due course on any proposed changes."

source:
Autumn Statement 2016 – chancellor’s full speech :: Contractor UK

[d000hg]

I turnover half again over that figure, on a good year.
I suspect a lot of others do the same.

I suppose a reasonable number of people do but I very much doubt it's the norm. And nobody is going to have any sympathy that people earning £100k+ are getting squeezed a bit... it's not like "the rich" who just sneak inside the higher tax threshold and get ire from the lefties, or indeed that you're paying more tax - surely a loophole is just being tightened?

I personally think if you can bring in £10k/month then good on you. But that puts you into the super-tax territory not just FRS issues