Change in VAT status

[Mustang]

I am currently working on a contract at an agreed daily rate. I am also not VAT registered, however I am going to register for VAT to be able to benefit from this.

How do I handle my rates?

Do I keep the overal rate the same but the figure now includes VAT or do I effectively increase my rate to my client to include the VAT knowing that they can claim the VAT back which brings it down to the current level?

I am assuming the latter but I just wanted to check........! TIA

[malvolio]

Oh jeez,..

Makes you wonder how some folk will survive :\

Keep your rate the same - VAT is nothing to do with your charges. Find out what's needed for a VAT invoice (there is a legal minimum). When you raise an invoice, add 17.5% on top as a separate entry. Charge the client the total. Complete a VAT100 return quarterly, account for your input and output VAT totals and send in the cheque for the balance. Read all the paperwork that comes with your registration. Find out about the flat rate scheme. Get an accountant (or if you've got one, get a better one by the sound of it). Do some research. Talk to the VAT man - believe it or not, they're really quite helpful.

I assume you've also thought about how to pay salary and dividends, what annual paperwork needs to be done, what personal insurances you might need, what to do about a pension fund or equivalent, how to minimise your exposure to IR35 and possibly S660a, what PI you need (if you need it - do you know?) and all the other little irritations. Or did you just decide you'd be a contractor for a while and make loads of money?

[Mustang]

From small acorns......

Thanks for the feedback (excluding the sarcasm). I understand your point, there is a lot of information to take on board and the amount of organisation is pretty large but the rewards are worth it. I am already benefitting from the change in lifestyle - not just the money - and I am in it for the long haul.

Whilst some questions may be elementary, we all have to ask them from time to time. In my case, having decided to become a freelancer, opportunity came along before all the i's were dotted and the t's crossed. Not an ideal situation but one I was determined to manage rather than miss the opportunity. It makes things a little harder but hard work never hurt anyone!

The best advise someone gave was pointing me in the direction of PCG. Both that site and this provide useful information and, particularly PCG, useful links/contacts. I look forward to the day that I am as worldly-wise as you and some of the others on this site.

Here's to a successful 2005!

[malvolio]

Good answer!

Last time someone tripped my sarcasm button you'd have thought I was some sort of super monster - good to see you took it in the spirit it was intended! Us cynical old buggers know what the rules are but, as I said, it's not so simple for the beginner.

You will do a lot worse than get into the PCG and read what's going on. They're much broader than IT and there are some very smart cookies in there. Enjoy...