Autumn statement - end of VAT flat rate scheme?

[youngguy]

Rules haven't changed for employer contributions via an umbrella.

Other expenses have, as alluded to in previous posts.

Umbrella may not be [quite so] bad for those with low expenses and a decent retained profit....ie bung a huge amount into pension and live off the rest, with a top off from retained profit ,or clear the ltd and get some buy to let etc

[youngguy]

There's more to a limited company than expenses and frs. Shareholding, income deferral, £5k tax free dividend. Admittedly it's less attractive now than it was on Tuesday but it still works.

I guess the question is what is the delta (which we won't know for a few weeks)?
Is running a ltd worth it for 5 or 10k more....probably. is it worth the hassle and admin if it is only say 1k.....maybe not.

This just goes to show the knock on effect Alan, for example if loads of contractors shut their ltds then good businesses like yourself suffer as well.

[Alan @ BroomeAffinity]

My point is shareholding is not a valid argument. Retained earnings are not reinvested in stock. We don't create value.

Profit is retained for tax purposes.

I could probably have been clearer. I meant allocating shares to spouse. I try to avoid the phrase "income splitting"

[Alan @ BroomeAffinity]

I guess the question is what is the delta (which we won't know for a few weeks)?
Is running a ltd worth it for 5 or 10k more....probably. is it worth the hassle and admin if it is only say 1k.....maybe not.

This just goes to show the knock on effect Alan, for example if loads of contractors shut their kids then good businesses like yourself suffer as well.

Indeed. 90% of our revenue is from contractor sources and I don't particularly want to go back to dealing with mainstream businesses if I can avoid it. But needs must.

[youngguy]

Indeed. 90% of our revenue is from contractor sources and I don't particularly want to go back to dealing with mainstream businesses if I can avoid it. But needs must.

It just shows the blinkered effect of trying to chase some tax.

Huge impact on many areas, not just contractors and the delivery of PS contracts .

I still *hope* supply and demand kicks in. Rate rises or contractors subbed to consultancies on bigger day rates means little else changes if PS want delivery and bodies in their buildings...but I fear that may be Ayr or more down the line.

[Eirikur]

I've been on standard VAT since I started and, to be honest, I never really felt the need to move. It's great getting hotels at the VAT free price etc.

You have to spend £1750 or more per month on hotels to be better off under the normal VAT regime (that's if you're billing £10k ex VAt per month and compared to the new 16.5 % flat scheme rate)

[vwdan]

You have to spend £1750 or more per month on hotels to be better off under the normal VAT regime (that's if you're billing £10k ex VAt per month and compared to the new 16.5 % flat scheme rate)

Which is ~£90 for the room, and then there's food and the like on top. And, the margin is even less if you're not billing £500p/d. I'm not anti the flat rate, there was just never enough in it for me to give up being able to get things VAT free. Not that I buy huge amounts, but you're talking £100 saving on a £500 piece of kit. Obviously the converse is that if your expenses are low then you can be quids in, of course.

I did do some calculations after 6 months or so and I was definitely better off at the time. Just looked at an invoice from last year where I did a stint away and I was paying about £520 a week (incl VAT) to the hotel (including meals etc). But then I do confess to not working particularly hard to minimising travel expenses - if I'm away for weeks I'm staying in spa hotels, not a tuliphole.

[TheCyclingProgrammer]

You have to spend £1750 or more per month on hotels to be better off under the normal VAT regime (that's if you're billing £10k ex VAt per month and compared to the new 16.5 % flat scheme rate)

How did you work that out? The new rate would only make you £20/month in surplus income at those figures. Equivalent to expenditure of £100/month net of VAT.

[northernladuk]

This is the only good thing about budget changes. Watching the mass of posts thrashing about throwing numbers and ideas left right and center and most of them getting it completely wrong.

[Eirikur]

How did you work that out? The new rate would only make you £20/month in surplus income at those figures. Equivalent to expenditure of £100/month net of VAT.

£10k -- incl VAT 12k
at a 16.5 % rate you keep £350
to be able to claim 350 VAT back at 20% you need to spend 350/20*100 =£1750

It's actually a bit less as you pay 20% corporation tax over the 350, which I forgot in my original calculation, so it would be 280 nett so 280/20*100=£1400.
So if you have VAT-ed expenses of £1400 or more per month on a 10k per month rate it is better not to be on the flat rate anymore after the 16.5% comes into effect