Nailed my first Contract

**Scruff** · 28 August 2014, 09:57

Hire an Accountant?

You need to CHARGE VAT, if you register. Only then will it be paid, on top of your Daily Rate.

**malvolio** · 28 August 2014, 10:10

Originally posted by Daplayer321 View Post

Hi,

I finally got my contract offer, before they send the contract i need to supply them with my business account details and LTD company (not yet set up but will get onto it immediately).

The agent (direct HR of the client) said they can pay weekly or monthly (which is better ? as i dont mind, are there any tax efficencies with either)?

I understand that when the Client pays me then they need to add VAT on top, so at the end of each week/month they pay me dailyrate worked + VAT, does the Client know they need to do this or do i need to make sure they do this to ensure i dont get shafted with paying the VAT bill myself out of the agreed day rate?

Thanks

Based on that question you have no idea how much trouble you are now in. Get an accountant, and read all the First Timer guides you can find (on here, on the PCG website, on most big accountants' websites), before you get into a complete hole.

This is not a game, getting it wrong can be very expensive.

**northernladuk** · 28 August 2014, 10:21

Originally posted by Daplayer321 View Post

Hi,

I finally got my contract offer, before they send the contract i need to supply them with my business account details and LTD company (not yet set up but will get onto it immediately).

Well done. You have done the easy bit! Now to get your house in order. Before you do anything, get it checked for IR35 using QDOS. Read up so you are vaguely aware of what they are talking about as well. Also while you are speaking to them get your PI/PL insurances. If the contract fails you need to go back and negotiate. If they don't budge then you have the choice of going inside IR35 of walking so everything isn't cast in stone yet.

The agent (direct HR of the client) said they can pay weekly or monthly (which is better ? as i dont mind, are there any tax efficencies with either)?

I understand that when the Client pays me then they need to add VAT on top, so at the end of each week/month they pay me dailyrate worked + VAT, does the Client know they need to do this or do i need to make sure they do this to ensure i dont get shafted with paying the VAT bill myself out of the agreed day rate?

Thanks

So it isn't an agent. An agent is a different company working as an intermediary. It's extremely important you understand these details very quickly as it changes how you deal them. An agent will be taking a cut of your money and know very little so you have to play them hard. If it is direct with the client it's a different ball game. Understand the situation quickly.

Find out what the invoicing period is. If it's monthly you are exposing yourself to about 5 weeks risk if you are paid weekly, up to two months if it's monthly. If its weekly invoicing and weekly payment terms you are only have a couple of weeks risk if they decide not to or can't pay you. Tax wise it doesn't make a difference, it's about exposure and how much of your money they have at any time.

They do not need to add VAT, you need to charge them VAT. Get an accountant and get your level of understanding up very quickly. Day rates are always rate + VAT. It's B2B. If you agree £400 a day they will expect you to charge them £400 + VAT. You also need to get on the Flat Rate Scheme quickly.

You are a business now and are legally responsible for your finances as well as being in charge of your own income so you really need to get up to speed and understand. There is no HR to hold your hand. You are a supplier to them so their HR won't give a hoot and if you start asking too many questions it's going to raise eyebrows.

Time to start reading hard. Use the links to the right and if you have any questions at all use the search method as shown in the link below. Everything you can ever think of and a crap load of stuff you haven't yet encountered has been discussed on here in the past.

http://forums.contractoruk.com/welco...uk-forums.html

**northernladuk** · 28 August 2014, 10:23

Check Cojaks post in the link below. She always links all the useful stuff you need to read up on for starters.. You can find it here...

http://forums.contractoruk.com/welco...ml#post1952321

**glippiglop** · 28 August 2014, 10:57

Originally posted by Scruff View Post

Hire an Accountant?

You need to CHARGE VAT, if you register. Only then will it be paid, on top of your Daily Rate.

This advice is dangerously vague. He doesn't need to register or charge for VAT until he comes close to passing the VAT threshold, which is currently £81,000 over a 12 month period. Registering for VAT at this stage would be a waste of time and completely unnecessary burden when he needs to think about more pressing concerns like the legal setup of his company, learning about NICs, PAYE payment thresholds, dividends etc...

**northernladuk** · 28 August 2014, 11:07

Originally posted by glippiglop View Post

This advice is dangerously vague. He doesn't need to register or charge for VAT until he comes close to passing the VAT threshold, which is currently £81,000 over a 12 month period. Registering for VAT at this stage would be a waste of time and completely unnecessary burden when he needs to think about more pressing concerns like the legal setup of his company, learning about NICs, PAYE payment thresholds, dividends etc...

But he is losing money if he doesn't. If he goes on the FRS and counts his 1% discount for the first year he can make a bit of money from it.

**Daplayer321** · 28 August 2014, 11:28

Hi,

Thanks for the Info, my daily rate is £560 so will easily go above the VAT threshold (initial 6 months contract but can be extended).

I have already spoken to my accountant who will sort out setting up the LTD for me as well as get me VAT registered on the flat rate scheme.

I will be appointing my wife as a worker of my company to get maximum tax efficency as well as pay myself dividends.

I understand how NI/PAYE tax efficency works as my accountant went through this with me (apologises if i had sounded vague earlier).

As its my first contract i have been told that i should get this IR35 checked which i will do using a reputable company (what are the usual charges?).

When i spoke to the internal recruiter they mentioned i would need to log my hours via their internal system which they will then pay me once approved.

My question was really do they know they need to add VAT on top of my normal daily rate or do i need to specifically mention it and have it mentioned on my contract when they send this to me.

Thanks,

**malvolio** · 28 August 2014, 11:36

Originally posted by Daplayer321 View Post

Hi,

Thanks for the Info, my daily rate is £560 so will easily go above the VAT threshold (initial 6 months contract but can be extended).

I have already spoken to my accountant who will sort out setting up the LTD for me as well as get me VAT registered on the flat rate scheme.

I will be appointing my wife as a worker of my company to get maximum tax efficency as well as pay myself dividends.

I understand how NI/PAYE tax efficency works as my accountant went through this with me (apologises if i had sounded vague earlier).

As its my first contract i have been told that i should get this IR35 checked which i will do using a reputable company (what are the usual charges?).

When i spoke to the internal recruiter they mentioned i would need to log my hours via their internal system which they will then pay me once approved.

My question was really do they know they need to add VAT on top of my normal daily rate or do i need to specifically mention it and have it mentioned on my contract when they send this to me.

Thanks,

All of which tells me you still haven't grasped how much you don't know.

If your client doesn't understand VAT, you are in even more trouble. That rate on a first contract implies you are something either specialist or senior, they will expect you to understand your business*. However, I suggest you read your contract properly: if it is silent on the matter, ask them to confirm that the quoted rate is VAT exclusive.

* The thing every new contractor forgets is that whatever your skills are, being a contractor is now your job. Do it as well as you can.

**northernladuk** · 28 August 2014, 12:39

Originally posted by Daplayer321 View Post

I will be appointing my wife as a worker of my company to get maximum tax avoidance as well as pay myself dividends.

Make sure you understand this fully and do it properly. I am not a fan of this but others will pile in and say do it so your choice but don't go in blindly and assume it's your right to do this.

If you are talking about paying her them make absolutely sure she does enough to warrant it. A bit of book keeping at 8k a year is a joke bearing in mind you pay a professional accountant less than £1500. If she isn't working for the company don't pay her. If you are talking about making her a shareholder then do your research and know what you are doing.

Nailed my first Contract