New to this, forgive me for the questions..

[richy]

..
5. The daily rate was set by the agency, when I bill or invoice the client, do I bill as a daily rate plus add VAT on? (When I am VAT registered.. but until then, just bill the daily amount.. is that right?).

Hi, you seem to have figured most stuff out ok. SJD will cost you about £1000 per annum. Standard accountants (like the one I use, still with experience of IT and IR35 contractors), will cost you about £450 per annum... There is a lot to learn, so going with someone for the first year like SJD will at least give you the knowledge to consider going with a cheaper one, but it is quite a lot of money you will save if you go with a local accountant!

ok, re (5), as your starting out becarefull hat the Agency are as upfront and open with rates and other figures as you are with them. If they ask you want rate you want, tell them "I'll seriously consider your best offer". If you say you'll be happy with £24 they will simply give you that. If the agency tell you that they are on your side, arguing hard for your with the end client.. be wary, because many end clients pay a flat rate, and if the client is paying £45, is it fair for the agency to take £20? (no!). Especially as the end client will look at you and consider if you are worth £45 per hour... they wont know that the agency is taking a big cut...

So ask:
* What commission rate the agency is taking, if they are good it will be 5%. if they are reasonable people it wont be more than 15%. if it is any more than that and they are taking more than they are due. Really anything more than £5 per hour in their pocket is ripping you off. Just ask for "the lowdown on commission rates" they shouldn't have any problem with telling you, if they are as honest as you are.

* Get them to put their commission rate in writing to you, even just an "informal" email!

* Remember, its worth asking it now, because if you get on site and the rest of the contractors are getting £40 per hour off the agency... over a six month contract that is £15,600 of your money they have nicked!

* Agencies will tell you they are on your side, and they tell the end client the same. so you can realise they are just out to make the biggest margin off the client, and the same with you!

* I don't know if there are tables of example rates per sector, but I know from experience that Health and Safety end client pays around £45 per hour, as does IT. Others are probably similar ranges, for skilled labour.

* Finally... not feel pushed around by the agency, don't make on the spot decisions to accept rates or terms. Give yourself at least 6 hours to think things over, be honest with them, and tell them you need to think about it, if they refuse to understand they are probably screwing you in other ways too.

N.B. I wish I could have given myself this advice before I started out!
thx, richy

[TheFaQQer]

Not exactly. As far as I understand, you charge the client your fee + (17.5% of fee). The figure you pay the HMRC is 13% of (your fee+17.5%). So you don't keep the 4.5% but rather less !

The flat rate is 12% for the first year of registration.

Not necessarily - it depends on the industry that you are in. It seems that IT contractors pay 13% or 12% (first year), but if you are in a different industry, then you may pay a different rate.

Get your big expenses in first, e.g. laptop, furnishings, stationery, etc. etc., and claim the VAT back at 17.5%. Then move onto flat rate scheme - you need to apply for this before the start of your next VAT quarter so that it's in place. If you are moving onto flat rate scheme, then the earlier you do this, the better, since the 1% discount only applies in the first year.

[RockyBalboa]

Not necessarily - it depends on the industry that you are in. It seems that IT contractors pay 13% or 12% (first year), but if you are in a different industry, then you may pay a different rate.

Get your big expenses in first, e.g. laptop, furnishings, stationery, etc. etc., and claim the VAT back at 17.5%. Then move onto flat rate scheme - you need to apply for this before the start of your next VAT quarter so that it's in place. If you are moving onto flat rate scheme, then the earlier you do this, the better, since the 1% discount only applies in the first year.

Interesting stuff fagger.. so this 'vat quarter'.. when do these start or are they individual? E.g. if I start trading in June 07 will my next vat quarter be in September 07?

Does the above mean that I can start at 'regular' voluntary registration of VAT @ 17.5% (make my large purchases) and then, at the next quarter, switch to the flat rate scheme?

[oraclesmith]

Interesting stuff fagger.. so this 'vat quarter'.. when do these start or are they individual? E.g. if I start trading in June 07 will my next vat quarter be in September 07?

Does the above mean that I can start at 'regular' voluntary registration of VAT @ 17.5% (make my large purchases) and then, at the next quarter, switch to the flat rate scheme?

The VAT quarters start from your VAT registration not your company registration.

You can apply for the flat rate scheme when you like. It will take HMRC a little while to process the application and confirm your percentage.

[Bluebird]

and you pay corp tax on any profit you make on the difference between VAT Charged and VAT paid to HMC

[oraclesmith]

and you pay corp tax on any profit you make on the difference between VAT Charged and VAT paid to HMC

Only if it remains as company net profit. It's company money just like any other company income.

[Bluebird]

Only if it remains as company net profit. It's company money just like any other company income.

yep, you're quite right.

It makes it even better if you actually spend it, then you can say that Gordo "bought your new laptop for you" !

[richy]

didn't realise the flat-VAT was on the total (including VAT), thought it was just the NET. thanks for educating me on that one! (13% of the fee+17.5%)

Re VAT registration, you can include payments for 30 days before registration date I gather. and you can backdate registration a little too. so if you register on 1 April, starting you can claim for March ;-)

One thing I wonder is, can I accept payment without VAT during the period I am waiting for my VAT number? some agencies wont pay including VAT I heard while registration is pending.. or is there a way to get agencies to pay the VAT while still pending?

thx. richy

[Dark Black]

One thing I wonder is, can I accept payment without VAT during the period I am waiting for my VAT number? some agencies wont pay including VAT I heard while registration is pending.. or is there a way to get agencies to pay the VAT while still pending?
thx. richy

Been done to death on here I think - but basically invoice as "VAT registration pending" and for 0% VAT. Once you have your registration number you can invoice the agency for the outstanding VAT.

[TheFaQQer]

* What commission rate the agency is taking, if they are good it will be 5%. if they are reasonable people it wont be more than 15%. if it is any more than that and they are taking more than they are due. Really anything more than £5 per hour in their pocket is ripping you off. Just ask for "the lowdown on commission rates" they shouldn't have any problem with telling you, if they are as honest as you are.

* Get them to put their commission rate in writing to you, even just an "informal" email!

If you find one that only takes 5%, then you should name and praise them!! 5% seems incedibly low, given the factoring they have to take into account, plus if you've opted in they have to pay you regardless of whether they see the money from the client.

We're back to the old argument of "does it matter what the agent takes?" that has been done to death on here - I'm still of the policy that if I'm happy with the rate, then I don't care what the agent gets; if I'm not, then I don't do the work. But I'm on a high enough daily rate to be able to argue that - if you are only getting £20 an hour, and the agent gets £40, then the agent's percentage becomes more important.

* Agencies will tell you they are on your side, and they tell the end client the same. so you can realise they are just out to make the biggest margin off the client, and the same with you!

Exactly - a common mistake on first contract(s) is to cut your rate so that you're cheaper to the client, and you look good. What tends to happen is that the agency just takes a bigger cut, while the client pays the same.