Flat Rate & Invoice Payments

**stek** · 14 August 2012, 13:53

Can you explain EXACTLY what ur trying to do here? My 'dodgyness' detector is going off!!

**Clare@InTouch** · 14 August 2012, 13:54

If you're FRS registered then you simply pay a percentage of your sales over to HMRC. It doesn't matter whether your suppliers are VAT registered, FRS registered, or not registered at all (other than that may charge less if not registered).

**SarahL2012** · 14 August 2012, 13:55

If the contractor you want to use isn't registered for VAT then you're in luck I think. He can invoice you without adding VAT onto the invoice (because he isn't registered) and then you can pay over VAT as normal under the usual flat rate rules.

The problems arise when you use a contractor who has to charge you VAT. If you're paying VAT under the flat rate rules then you can't claim back the VAT on their invoice and you can suffer financially.

**Goodmans** · 14 August 2012, 14:05

I guess, i confused you all.

I am a director of a LTD company ABC Ltd. VAT(flat rate) registered.

I have recruited a contractor XYZ (who is self employed contractor) to develop a software for me. For that he will be charging me some money through invoice. It means i am buying his services.

As he is not VAT registered. he will be invoicing me with out any VAT. in that case should i pay any VAT(any rate) to HMRC?

Some one said i dont have to do anything if I (ABC Ltd) on Normal Flat rate. But there will be slight changes if i am on Flat Rate(Which I am on now). what are they?

Regards
GMans.

**Clare@InTouch** · 14 August 2012, 14:08

If you're on flat rate then you pay a percentage of your sales income to HMRC - purchases don't have any effect (unless capital over £2,000).

**Maslins** · 14 August 2012, 14:21

You just pay their invoice (without VAT) as normal. When charging your client you add VAT. I doubt it'll qualify as a disbursement, so you'd need to add VAT to your whole sales invoice, even if it partly relates to work where you paid a non VAT registered business.

In short, this won't hurt you at all. If on the other hand you subbed work out to a contractor who WAS VAT registered, then being on the FRS would hurt you...so bear this in mind if you're likely to subcontract work often.

**stek** · 14 August 2012, 14:32

Originally posted by Maslins View Post

You just pay their invoice (without VAT) as normal. When charging your client you add VAT. I doubt it'll qualify as a disbursement, so you'd need to add VAT to your whole sales invoice, even if it partly relates to work where you paid a non VAT registered business.

In short, this won't hurt you at all. If on the other hand you subbed work out to a contractor who WAS VAT registered, then being on the FRS would hurt you...so bear this in mind if you're likely to subcontract work often.

We are all assuming it's an IT contractor, he might be getting his roof fixed on the Ltd's dollar.....

**Goodmans** · 14 August 2012, 14:34

Originally posted by Clare@InTouch View Post

If you're on flat rate then you pay a percentage of your sales income to HMRC - purchases don't have any effect (unless capital over £2,000).

Thanks for your reply. I am very new to this field so confused a bit about the work Capital. Sorry for being pain in the neck.
I may have to pay him around 10K. We are trying to develop a software on my company's name. The software which we will be developing is any how related to word "Capital"?

Regards
GMans.

**Goodmans** · 14 August 2012, 14:39

Originally posted by stek View Post

We are all assuming it's an IT contractor, he might be getting his roof fixed on the Ltd's dollar.....

Sorry, am I doing something wrong here?

Flat Rate & Invoice Payments