Reply to: New to this, forgive me for the questions..

[M@H]

Minimum 12.5% from what I've heard. Some will try to take 30% or more though.

My last agency was getting 6% (Spring) Current one is getting 10%.

Cheers
Matt

[Bluebird]

Just spend it on a new laptop.

what one every month ?

[oraclesmith]

Just spend it on a new laptop.

[Bluebird]

The corporation tax is only paid on revenue less expenses so you in reality wouldn't be paying CT on the whole amount... the extra VAT is treated as additional revenue.

yes, but if you would make 10k profut without the FRS, and then with the FLS you make 10.5k, you get CT'd on the extra £500 which is the VAT, in effect you get CT's on the whole amount, unless you have huge expenses or don't make a profit.

[achillea]

The corporation tax is only paid on revenue less expenses so you in reality wouldn't be paying CT on the whole amount... the extra VAT is treated as additional revenue.

[Gonzo]

Sorry, I've had 2 glasses of wine and just spotted an error in my example. The correct calculation is:

Revenue for month £10,000 excl VAT
VAT charged to client (17.5%) £1,750
If registered at 13% flat rate, VAT due £1,527.50 (13% of £11,750) **
VAT retained by business £222.50

** The 13% is calculated on the net revenue to client + 17.5% vat

Don't forget you then have to pay 20% Corporation Tax on the £222.50, so leaving you £178.

Not so great but it still beats having to tot up all expenditure and netting it off.

[achillea]

Flat rate scheme

Sorry, I've had 2 glasses of wine and just spotted an error in my example. The correct calculation is:

Revenue for month £10,000 excl VAT
VAT charged to client (17.5%) £1,750
If registered at 13% flat rate, VAT due £1,527.50 (13% of £11,750) **
VAT retained by business £222.50

** The 13% is calculated on the net revenue to client + 17.5% vat

[achillea]

Flat Rate Scheme

You can join the flat rate scheme as long as your company turnover is less than £150k per annum (excl VAT). The percentage you give back to HMRC depends on your business classification - this percentage can differ by sector. We are registered as 'Management Consulting' which attracts a 12.5%. However you get 1% off for your first year which is worth having.

FYI the flat rate calculation is (example):

Revenue for month £10,000 excl VAT
VAT charged to client (17.5%) £1,750
If registered at 13% flat rate, VAT due £1,300
VAT retained by business £450*

* This is supposed to cover all of your 'input VAT'. In your accounts this is shown as a VAT Adjustment ie additional revenue, added to your net revenue subject to tax.

[TheFaQQer]

heard of a few, i never been lucky enough to deal with these agencies yet myself mind you, Penta Consulting is the one I can remember off the top of my head. average seems to be upto 15%..... what commission rates are typical? thx. richy

Minimum 12.5% from what I've heard. Some will try to take 30% or more though.

[richy]

If you find one that only takes 5%, then you should name and praise them!! 5% seems incedibly low, given the factoring they have to take into account, plus if you've opted in they have to pay you regardless of whether they see the money from the client.

heard of a few, i never been lucky enough to deal with these agencies yet myself mind you, Penta Consulting is the one I can remember off the top of my head. average seems to be upto 15%..... what commission rates are typical? thx. richy

[TheFaQQer]

* What commission rate the agency is taking, if they are good it will be 5%. if they are reasonable people it wont be more than 15%. if it is any more than that and they are taking more than they are due. Really anything more than £5 per hour in their pocket is ripping you off. Just ask for "the lowdown on commission rates" they shouldn't have any problem with telling you, if they are as honest as you are.

* Get them to put their commission rate in writing to you, even just an "informal" email!

If you find one that only takes 5%, then you should name and praise them!! 5% seems incedibly low, given the factoring they have to take into account, plus if you've opted in they have to pay you regardless of whether they see the money from the client.

We're back to the old argument of "does it matter what the agent takes?" that has been done to death on here - I'm still of the policy that if I'm happy with the rate, then I don't care what the agent gets; if I'm not, then I don't do the work. But I'm on a high enough daily rate to be able to argue that - if you are only getting £20 an hour, and the agent gets £40, then the agent's percentage becomes more important.

* Agencies will tell you they are on your side, and they tell the end client the same. so you can realise they are just out to make the biggest margin off the client, and the same with you!

Exactly - a common mistake on first contract(s) is to cut your rate so that you're cheaper to the client, and you look good. What tends to happen is that the agency just takes a bigger cut, while the client pays the same.

[Dark Black]

One thing I wonder is, can I accept payment without VAT during the period I am waiting for my VAT number? some agencies wont pay including VAT I heard while registration is pending.. or is there a way to get agencies to pay the VAT while still pending?
thx. richy

Been done to death on here I think - but basically invoice as "VAT registration pending" and for 0% VAT. Once you have your registration number you can invoice the agency for the outstanding VAT.

[richy]

didn't realise the flat-VAT was on the total (including VAT), thought it was just the NET. thanks for educating me on that one! (13% of the fee+17.5%)

Re VAT registration, you can include payments for 30 days before registration date I gather. and you can backdate registration a little too. so if you register on 1 April, starting you can claim for March ;-)

One thing I wonder is, can I accept payment without VAT during the period I am waiting for my VAT number? some agencies wont pay including VAT I heard while registration is pending.. or is there a way to get agencies to pay the VAT while still pending?

thx. richy

[Bluebird]

Only if it remains as company net profit. It's company money just like any other company income.

yep, you're quite right.

It makes it even better if you actually spend it, then you can say that Gordo "bought your new laptop for you" !

[oraclesmith]

and you pay corp tax on any profit you make on the difference between VAT Charged and VAT paid to HMC

Only if it remains as company net profit. It's company money just like any other company income.