IR35 new rules and VAT

[Bluebird]

Surely if more contractors are pushed towards PAYE type engagements with clients, then such Fixed Term Contracts will not be subject to VAT?

HMRC may receive more in terms of Tax and NI, but many companies may prefer the fixed term route?

[Lance]

not sure what you're driving at here.

If you use a PAYE umbrella the client still pays VAT.
The client claims any VAT back in any case.
I cannot see that VAT has any bearing whatsoever on IR35.

[Amanensia]

Depends on the client. In general FinServ clients won't be able to claim back the VAT (or only a small proportion of it.) You might think they could therefore bump up effective salaries for ex-contractors moving to fixed term contracts direct with the client to reflect the VAT saving - but I wouldn't bet on it!

[bstar1]

I contract direct to client, no agency, no vat.

[dx4100]

I contract direct to client, no agency, no vat.

You need to up your rate

[Bluebird]

I was thinking more that companies might employee individuals directly as employees with all the benefits that gives the employee but without the cost of VAT.

If a company needs a PM for 12 months - surely it makes it more viable for the company to give them and employment contract for 12 months and not pay VAT?

[Lance]

I was thinking more that companies might employee individuals directly as employees with all the benefits that gives the employee but without the cost of VAT.

If a company needs a PM for 12 months - surely it makes it more viable for the company to give them and employment contract for 12 months and not pay VAT?

you don't understand VAT....

EDIT: or the cost of employment

[dx4100]

I was thinking more that companies might employee individuals directly as employees with all the benefits that gives the employee but without the cost of VAT.

If a company needs a PM for 12 months - surely it makes it more viable for the company to give them and employment contract for 12 months and not pay VAT?

You need to read up on VAT and how companies handle it. Its not a "cost".

[Amanensia]

You need to read up on VAT and how companies handle it. Its not a "cost".

Again, depends on the client. For many financial services organisations it is very much a cost.

[DeludedKitten]

Again, depends on the client. For many financial services organisations it is very much a cost.

Which is potentially a factor in financial services companies being prepared to ditch contractors and take them on as PAYE. They no longer have 20% VAT that they can't reclaim but they do have National Insurance to pay instead so at the worst it's cost neutral to them.