Limted company on flat rate scheme

[Jessica@WhiteFieldTax]

Let's say I earn £10 per hour and worked 1000 hours total banked would be £10000 (gross) VAT is £1666.67 and net £8333.33.

Its all speculation unless you are clear whether the £10 an hour is vat inclusive or vat exclusive.

[Newbie Simon]

The agency has said it excludes VAT, they also take 10% so every £10 they make £1

[northernladuk]

The agency has said it excludes VAT, they also take 10% so every £10 they make £1

Well now you know you have the opportunity to negotiate it down to 6% at next renewal. Saying that am not sure what the agency take is relevant here. They get a figure from the client, take a cut and then pay you the rate agreed... Or they should be!!

[TheFaQQer]

The agency has said it excludes VAT, they also take 10% so every £10 they make £1

So, you invoice £10 + VAT per hour = £12

You then pay £1.74 of that to HMRC, assuming you are on the FRS rate of 14.5%

So your company earns £10.26 per hour because of the FRS profit, and pays corporation tax on that, leaving you with £8.21 an hour.

If your rate is 13.5% (as you mention earlier), then you pay over £1.62 for each hour worked, have profit of £10.38 an hour, and after corporation tax are left with £8.304 an hour.

If you are clear to your accountant about your rate being exclusive of VAT, and they are doing it wrong, then you need to change your accountants quickly before anything else gets messed up.

[Newbie Simon]

Thanks TheFaQQer

Hourly rate inclusive of VAT:-

£8.33+VAT=£10
£10-£1.35-CT=£6.92

Hourly rate exclusive of VAT:-

£10+VAT=£12
£12-£1.62-CT=£8.30

Looks like my accountant has got it wrong