Autumn Statement 2016

[jamesbrown]

Well it looks like we'll all be coming off the FRS then.

I haven't read the detail, but I don't follow your comment. Isn't it simply a new test for whether the 16.5% rate applies, with the FRS implementation remaining the same otherwise? I.e. Worst case scenario is a slight reduction in FRS profit (most contractors/service companies on the FRS will be using the 16.5% rate)?

[eek]

I haven't read the detail, but I don't follow your comment. Isn't it simply a new test for whether the 16.5% rate applies, with the FRS implementation remaining the same otherwise? I.e. Worst case scenario is a slight reduction in FRS profit (most contractors/service companies on the FRS will be using the 16.5% rate)?

I guess most would go on the standard VAT regime. it won't be any hassle if you are using Freeagent or anything else and for the difference in money you would probably claim more back by just doing a proper tax return.

14.5% and I make a profit from the scheme
15.5% and I would probably break even.
16.5% and I will do the paperwork as it probably more profitable.

[jamesbrown]

I guess most would go on the standard VAT regime. it won't be any hassle if you are using Freeagent or anything else and for the difference in money you would probably claim more back by just doing a proper tax return.

Yes, agreed, the profit will be marginal, but I didn't follow the comment about the test based on goods. I'm not sure what else they would use. The point of the measure is to target contractor companies.

[TheCyclingProgrammer]

I haven't read the detail, but I don't follow your comment. Isn't it simply a new test for whether the 16.5% rate applies, with the FRS implementation remaining the same otherwise? I.e. Worst case scenario is a slight reduction in FRS profit (most contractors/service companies on the FRS will be using the 16.5% rate)?

Slight? I wouldn't call a reduction of over £2k for somebody on £100k turnover slight.

At the new rate on a £100k turnover you would make £200 in flat-rate surplus income.

How much input VAT did you pay on your expenses last year? I must have paid more than £200 in VAT on my accountancy fees alone.

My expenditure on goods is near to zero - that makes me a "low cost" trader according to the new FRS test as most of my expenses are on services (accountancy fees, travel, web hosting, software etc.). Remaining on the FRS would probably cost me about £1k a year at least and I imagine many other contractors will be in the same position.

[Rabotnik]

When they talk about removing the "5% tax-free allowance" for PS contractors in section 5.2, I assume they mean the first 5% on Dividends?

[jamesbrown]

Anyway, I guess it's pretty irrelevant. Bottom line, the FRS is much less worthwhile and PS contractors need to invest in lube companies on the AIM.

[TheCyclingProgrammer]

When they talk about removing the "5% tax-free allowance" for PS contractors in section 5.2, I assume they mean the first 5% on Dividends?

No, they are talking about the 5% cost allowance for those that are caught by IR35.

[jamesbrown]

Slight? I wouldn't call a reduction of over £2k for somebody on £100k turnover slight.

At the new rate on a £100k turnover you would make £200 in flat-rate surplus income.

How much input VAT did you pay on your expenses last year? I must have paid more than £200 in VAT on my accountancy fees alone.

My expenditure on goods is near to zero - that makes me a "low cost" trader according to the new FRS test as most of my expenses are on services (accountancy fees, travel, web hosting, software etc.). Remaining on the FRS would probably cost me about £1k a year at least and I imagine many other contractors will be in the same position.

No, you're absolutely right. I was focusing on your comment about goods but, having done the calculations, it is a large drop in profit. Agreed. I'm not on the FRS.

[Rabotnik]

No, they are talking about the 5% cost allowance for those that are caught by IR35.

Ah, cheers, never heard of that.

[TheCyclingProgrammer]

Yes, agreed, the profit will be marginal, but I didn't follow the comment about the test based on goods. I'm not sure what else they would use. The point of the measure is to target contractor companies.

This will affect anyone whose expenditure largely consists of services rather than goods.

Either way, we're going to lose out but I'm more annoyed about the additional burden. The FRS is simple. We always needed to keep receipts or some other evidence of our expenditure but now we need to make sure we have a valid VAT receipt for everything in order to reclaim the VAT, including for all the little bits related to travel and subsistence. We didn't need to worry about apportioning VAT reclaims for any personal use and now we do.

And probably because of the twats pushing schemes that genuinely take advantage of the FRS like this:
http://forums.contractoruk.com/accou...-millions.html

Oh well, at least I will be able to reclaim the VAT on all of my hardware purchases and not only my bigger ones (or worry about trying to group them together from the same supplier). And if I do end up getting a garden office through the business I can reclaim the VAT on the lot, installation and delivery included (subject to apportionment for any personal use though).