Reply to: Has Gordon dropped a clanger?

[Mickmanus]

its paying corp tax on your bit of the flat rate vat that pisses me off!
That should be excempt!

Yes it bloody should be

[rawly]

I did say a 'saving on VAT' - it obviously wasn't in relation to gross income I do understand where your % comes from, however. The main point of this discussionm remember, was that there was a guy further up who seemed to think you only got it for IT software sales or whatever. He must be pretty miffed then he's been missing out on a 2.4-3.4%(overall) saving!

As I don't work as an 'IT Contractor', I'm not sure what category I'll fall into yet. I'm hoping for the 9% or 10% one !!!!

[Maxamus]

its paying corp tax on your bit of the flat rate vat that pisses me off!
That should be excempt!

[Gonzo]

Here's a link to the tables used by HMRC:

http://customs.hmrc.gov.uk/channelsP...yType=document

As you can see an 'IT bod' gets 13% which I make out to be a 4.5% saving on the VAT. In the first year you also get a bonus 1% knocked off(12%) meaning you get a 5.5% saving on the VAT. If your manage to get classed in another category you pay even less.

It is not quite that good.

IT Bod pays 13% on the gross (i.e. the invoice amount + the vat).

So, for an invoice of £1000 + £175 VAT under the flat rate scheme £1175 * 13% = £152.75 is due.

That is a saving of £22.25 or 2.225% of the invoice.

Oh yes, yourco then has to pay corporation tax on that £22.25. Not such a great saving after all but beats having to worry about adding and subtracting all the VAT on every item of income and expenditure.

Usual disclaimer - IANAA etc etc

EDIT - Obviously WHA is an accountant as he beat me to it

[philip@wellwoodhoyle]

Here's a link to the tables used by HMRC:

http://customs.hmrc.gov.uk/channelsP...yType=document

As you can see an 'IT bod' gets 13% which I make out to be a 4.5% saving on the VAT. In the first year you also get a bonus 1% knocked off(12%) meaning you get a 5.5% saving on the VAT. If your manage to get classed in another category you pay even less.

Oh dear!! The 13%(12%) is on the gross amount, whereas the 17.5% is on the net, so the difference is a lot less than 4.5/5.5% - in fact it is as mentioned a couple of posts back.

[rawly]

by registering for flat rate you benefit by appx 3.4% for the first year. Then 2.4%.

Here's a link to the tables used by HMRC:

http://customs.hmrc.gov.uk/channelsP...yType=document

As you can see an 'IT bod' gets 13% which I make out to be a 4.5% saving on the VAT. In the first year you also get a bonus 1% knocked off(12%) meaning you get a 5.5% saving on the VAT. If your manage to get classed in another category you pay even less.

[TheFaQQer]

Well it's clearly not working the further they push it the more people want to find ways to avoid it

"The more you tighten your grip, the more star systems will slip through your fingers." - Princess Leia, 1977

[PAG]

by registering for flat rate you benefit by appx 3.4% for the first year. Then 2.4%.

[rawly]

You might want to check your sums. Flat rate vat is worth a couple of percent to someone in the business of "software consultancy and supply" or similar.

http://www.hmrc.gov.uk/manuals/bimmanual/BIM31585.htm

[pickle]

[QUOTE=rawly]

Next, he's pushed me out of MSC and into Ltd, and so now as another extra I also gain the benefits of Flat VAT, worth over 5%.
[QUOTE]

You might want to check your sums. Flat rate vat is worth a couple of percent to someone in the business of "software consultancy and supply" or similar.

[tim123]

For various reasons I have operated under an umbrella up until now but the measures that are about to come into effect have forced me to go down the ltd route, This will halve my tax liability as I see it so why did they bother? I'm sure my situation is in no way unique and I expect every other person under an umbrella to do the same.

Did they just assume we would put up with it? Are small ltd's next on the 'to do' list for GB?

Back to the point I have made many times before.

The majority of MSC users are not HiTech workers. They are supply teachers, agency nurses, railway workers etc......

These people are not likely to incorporate.

Gordo is onto a winner.

You are caught in the flack.

tim

[Diestl]

I think they will ditch IR35.

[Euro-commuter]

Or Expect the torys to be in power.

They're going to change it all? Oh Ye of excessive faith!

[Diestl]

Or Expect the torys to be in power.

[The Lone Gunman]

My take on Gordon's crackdown on MSCs is that, in part, they want to try and define more clearly what a Personal Service Company is.

Expect IR35 MKII in 2008.

Ditto. Start planning your exit strategies right now.