flat rate vat scheme question

[kristen330]

£100+VAT to register for VAT...I'm in the wrong game, oh wait !

I'd make sure there wasn't some other cost associated with the actual VAT returns, if they are going to charge you £100 for registering they sure as hell are not going to prepare and submit the VAT returns for free.

Sorry I wasn't clear. It's £120 for vat reg + vat returns, and vat de-reg when winding down the company. I think that's pretty reasonable. As I posted earlier though, I don't think I will bother registering for VAT as my daily rate isn't high enough for it to make much difference on a monthly basis. If I'm ever in the fortunate position of earning £300/day+, then i'll use my 1% bonus to use on that contract!

Think i'm going to try to get a perm job after this, or go back to uni. Contracting and temping is too unstable a lifestyle! At least I can say I've tried it though!

[northernladuk]

Or get a better accountant....

[SueEllen]

@Kristen330 you can learn to do VAT yourself there are lots of guides from accountants online.

If you only have one client it is very easy.

[Michael at BI Accountancy]

the accountant has said it would cost an additional £100+vat for the year. i.e. 750+vat as oposed to 650+vat if he didn't register me for vat.

£100+VAT to register for VAT...I'm in the wrong game, oh wait !

I'd make sure there wasn't some other cost associated with the actual VAT returns, if they are going to charge you £100 for registering they sure as hell are not going to prepare and submit the VAT returns for free.

[northernladuk]

What else is he going to charge you for above and beyond the basic fee?

[TheFaQQer]

The net benefit would be £50/month roughly of being on the FRS, and to register for vat and do the associated paperwork the accountant has said it would cost an additional £100+vat for the year. i.e. 750+vat as oposed to 650+vat if he didn't register me for vat.

Form VAT1 to register for VAT is only 4 pages long (paper version - download here) so it's not that much faff to complete. You can also do it online.

I wouldn't pay £100 (plus VAT) for someone else to do that, particularly since you know the answers to the questions anyway.

[kristen330]

Yes


No.

You collect 20% and then pay 13.5% on the total, so if you bill for £100+VAT you collect £120, you then pass 13.5% of the £120 to HMRC, which is £16.70. After the first year you are on 14.5% so you would be passing on £17.40. If you are classed as a limited cost trader, which you probably are as an IT Consultant, the rate is 16.5% and you would be passing on £18.60 in the first year and £19.80 for subsequent years.

You also can't claim any VAT back if you are on the FRS unless you spend more than £2,000 in a single transaction.

Very helpful post. Thanks for the example! Strange that the 13.5% is of the full amount rather than 13.5/20 if you see what I mean. It somewhat narrows down the relative percentage down a bit more than the actual difference. I think you're right about it being 16.5% for me (this is what my accountant said I'd be on - 15.5% with the first year discount).

The net benefit would be £50/month roughly of being on the FRS, and to register for vat and do the associated paperwork the accountant has said it would cost an additional £100+vat for the year. i.e. 750+vat as oposed to 650+vat if he didn't register me for vat.

For the 3 month contract, after fees, I would only be better off by £50. Better than nothing, but if I don't continue with the job after 3 months, the question is, is it worth going through the hassle of registering for vat for the sake of £50? I won't be doing the paperwork myself, but it seems a bit pointless! On the other hand, if I were to get extended beyond 3 months, then it would be worth it in the long run.

I think I'm not going to bother registering for VAT just yet, but may do so at a later stage if they extend my contract. Just don't see the point of the faff for the sake of £50. :/

[SueEllen]

So I take it you didn't got with your dad's accountant then? Or any accountant?

Some people think accountants are too expensive that is until they get in a mess....

[BigRed]

Quick question on the calcuation front. If the Flat rate vat is 14.5% for IT consultancy, does the 1% bonus bring this to 13.5%

Yes

and the difference between 20% and 13.5% is what the company would be allowed to keep? Is that the general jist of it?

No.

You collect 20% and then pay 13.5% on the total, so if you bill for £100+VAT you collect £120, you then pass 13.5% of the £120 to HMRC, which is £16.70. After the first year you are on 14.5% so you would be passing on £17.40. If you are classed as a limited cost trader, which you probably are as an IT Consultant, the rate is 16.5% and you would be passing on £18.60 in the first year and £19.80 for subsequent years.

You also can't claim any VAT back if you are on the FRS unless you spend more than £2,000 in a single transaction.

[pr1]

If the normal rate is 13.5% then the first year bonus brings it to 14.5% unless you are a limited cost trader.

other way round...

[northernladuk]

So I take it you didn't got with your dad's accountant then? Or any accountant?

[SueEllen]

Hi guys,

I was reading a few threads about VAT, but they didn't really answer my question so I'm creating a few thread! Hope the forum police don't mind!

I was speaking to some colleagues, and they told me it's not registering the company for VAT since the new rules came into effect. Is there any merit to this argument? I spoke to the accountant and he estimated I'd be better off by roughly £200 in 3 months, compared to not being on the scheme. I've asked him for the calculations so I can see where the savings are. In addition to this registering for VAT would cost an additional £100 + VAT accountancy fees, so wiping out half the gain in the first 3 months.

To not bother registering for VAT your business must not earn over £80,000 and not have any significant expenses that are VATable e.g. hotel costs.

How much you spend on your accountant is up to you and what they do for you as not all accountants cost £100 ex VAT per month. Accountants don't do your book keeping they are there for you to ask questions like this, good for providing contract references and help with mortgage applications.

Quick question on the calcuation front. If the Flat rate vat is 14.5% for IT consultancy, does the 1% bonus bring this to 13.5% and the difference between 20% and 13.5% is what the company would be allowed to keep? Is that the general jist of it?

If the normal rate is 13.5% then the first year bonus brings it to 14.5% unless you are a limited cost trader.

[northernladuk]

Are you talking about registering for VAT or for the FRS scheme?

What would cost 100 in fees? To register for VAT or to get an accountant.

Not the clearest post in a while I'm afraid.

[kristen330]

Hi guys,

I was reading a few threads about VAT, but they didn't really answer my question so I'm creating a few thread! Hope the forum police don't mind!

I was speaking to some colleagues, and they told me it's not registering the company for VAT since the new rules came into effect. Is there any merit to this argument? I spoke to the accountant and he estimated I'd be better off by roughly £200 in 3 months, compared to not being on the scheme. I've asked him for the calculations so I can see where the savings are. In addition to this registering for VAT would cost an additional £100 + VAT accountancy fees, so wiping out half the gain in the first 3 months.

Quick question on the calcuation front. If the Flat rate vat is 14.5% for IT consultancy, does the 1% bonus bring this to 13.5% and the difference between 20% and 13.5% is what the company would be allowed to keep? Is that the general jist of it?

Thanks again for your help guys!