Some newbie VAT qustions

[lithium147]

It's not that simple, but effectively correct about 40%.
It could even be effectively 60% saving if you pay the 25% on your dividends.
It's the only way that makes buying a mac book pro reasonably priced.
But this doesn't make it right to go and buy loads of toys, as its still your money your wasting.
Also, there are lots of rules about what you can buy and put through the company (without incurring extra taxes).

The items you buy will become assets of the company. If you sell them, you will incur a VAT liability. Also, there is depreciation on the assets which your accountant will need to include in your end of year accounts.

RE VAT FRS:
Unless you are subcontracting the work, its a virtually a no brainer.
I think you can also do this retrospectively.
You should look into the ASAP as you could be losing out right now.
While you are not in the scheme, you could look at buying all the small things that you would not get the VAT back while in the scheme.

I was wondering if you its possible to pay the company accountant 1 or 2 years fees up front before joining the scheme, am sure HMRC have thought of that one..

[Contreras]

Hi garnet,

I suggest you speak to a few accountants, either by telephone or face to face, most are happy to give a free initial consultation so take advantage of this and then choose someone you are comfortable dealing with. Common practice is to pay a fixed monthly 'retainer' for the accountancy services, in reality the bulk of which go towards preparing the year end accounts.

It's nearly always a no-brainer to register with the Flat Rate Scheme. If you do go for VAT registration then apply a.s.a.p. because otherwise you could be in the position of needing to issue an invoice but without a VAT number. You can opt for FRS once the company is VAT registered and it will apply to the current period.

Your company can still claim VAT back if on the FRS if it is for a capital asset >£2000 which your example is. Also bear in mind that assets usually aren't immediately deductible against CT in the year of purchase - it's the depreciation per year that is. See, you need an accountant.

Do NOT ask noob questions about contracting to your agent (like whether the rate includes VAT) or there is a good chance you will be screwed over.

It should state in the contract rate N+VAT. If it just says rate N, then feel free to tell the agent to re-word it to N+VAT.

[captainham]

Your company can still claim VAT back if on the FRS if it is for a capital asset >£2000 which your example is. Also bear in mind that assets usually aren't immediately deductible against CT in the year of purchase - it's the depreciation per year that is. See, you need an accountant.

Small correction - depreciation is not a deductible expense therefore the affects of this must be factored back into the CT calculation.

You would normally claim an asset against the Annual Investment Allowance in the year of purchase (or just expense if it doesn't really need to be an asset, e.g. £200 PC monitor), therefore it is immediately deductible in full in the year of purchase. The depreciation in subsequent will be added back into the CT calculation as you've already had a 100% deduction for it in the first year.

[psychocandy]

Ah your right, I explained it wrong.

What happens if you are VAT registered and the client is not is:
They will offer you X per day. That X will be including VAT.
If you say you want to add VAT on top, they wont agree with that, because they could employ some else who is not VAT registered who would accept X as there rate.

Not being funny but how many agencies turn over less than the VAT threshold or would even choose not to be VAT registered?

[psychocandy]

Ah your right, I explained it wrong.

What happens if you are VAT registered and the client is not is:
They will offer you X per day. That X will be including VAT.
If you say you want to add VAT on top, they wont agree with that, because they could employ some else who is not VAT registered who would accept X as there rate.

Is this a wind up?

[psychocandy]

Thanks all.
I am learning about VAT. I saw the contract (draft) and the daily rate is exclusive of VAT. So far so good. I will register for VAT from day 1.

Some more noob questions:
If I am VAT reg/ed (not in FRS) this means I can claim VAT on my purchases. So if I have J10 000 income in a month I owe J2000 as VAT.
If I buy something in this same month for J5000 I will need to be credited J1000 as VAT, i.e. I will owe J1000 for VAT.
One the other hand my company's taxable income will be J10 000 - J5000 = J5000 (if no other expences). Then there is the corporation tax etc.
In this example it seems I will have 40% off the price of my purchase. It is too good to be true. Where is the catch?

FRS VAT vs. VAT? Which one is better? Generally.

Completely lost me to be honest. Get an accountant. SERIOUSLY.