Reply to: How to spend 100k contractor income

[malvolio]

Yes


It's really difficult to edit a post without marking it as edited isnt't it?


Oops done it again


Maybee I should correct my spelling above





and again

Still don't see your point - I didn't edit anything other than to correct spelling, and that within a few seconds of the original post 'cos I'm really bad at proof reading.

And I still don't actually understand your original point either, come to that, but as the man said, WGAS.

[blacjac]

Did I?

Yes


It's really difficult to edit a post without marking it as edited isnt't it?


Oops done it again


Maybee I should correct my spelling above





and again

[NotAllThere]

Have you tried the PCG? They cater for all sorts of weird people - even oil and gas!

[rawly]

It's your risk of course, and you certainly know your sector better than I.

Ermmm, but it isn't my risk as I'm not in the IT Sector! Don't worry about it anyway. I realise that over 90% of people on here do work in IT departments, but not all of us do. Strange as it may sound, other technical sectors do use Contractors as well!

Infact, why am I on a Forum that is the "IT Contractors Portal" !!! Because, it is a good source of info and I've had loads of advise on here, and I've never found a Forum for Telecommunications contractors!
(P.S. May be I should set one up......)

Obviously too Niche!

Anyway, as I recall my accountant verified with the VAT people what Sector Telecommunications came under, and this is what the VAT people then put on my registration documents. So, I guess they must have answered this question before.

[ASB]

Well, the application was approved by VAT and hence can't be claimed back retrospectively. I think you'd struggle to find 'supplying services' from the official VAT list! As you are probably aware VAT works on Business Sector, and the list is here.

http://customs.hmrc.gov.uk/channelsP...345#P169_14547

I don't believe "Computer and IT consultancy or data processing" describes what my company does, so it would have to be "Business services that are not listed elsewhere". Seems straighforward to me....!

Infact, it is rather annoying that 'Business Services' exists at 11%, otherwise it would have to be "Any other activity not listed elsewhere" at 10% ! A Shame really.....

It's your risk of course, and you certainly know your sector better than I. But what they do say is:-

We will not normally check your choice of sector when we process your application. So if you have made a mistake you may pay too much tax or too little. Paying too little could mean that you are faced with an unexpected VAT bill at a later date.

However, if we approve you to join the scheme, we will not change your choice of sector retrospectively as long as your choice was reasonable. It will be sensible to keep a record of why you chose your sector in case you need to show us that your choice was reasonable.

[THEPUMA]

Well, the application was approved by VAT and hence can't be claimed back retrospectively

Yes they can. Plus interest.

[rawly]

I am assuming telecoms still comes in other business services at 11%. But is your business telecoms or supplying services to telecoms companies?

If the latter you should really be using the rate appropriate to the services you provide - this may still be 11% of course.

Well, the application was approved by VAT and hence can't be claimed back retrospectively. I think you'd struggle to find 'supplying services' from the official VAT list! As you are probably aware VAT works on Business Sector, and the list is here.

http://customs.hmrc.gov.uk/channelsP...345#P169_14547

I don't believe "Computer and IT consultancy or data processing" describes what my company does, so it would have to be "Business services that are not listed elsewhere". Seems straighforward to me....!

Infact, it is rather annoying that 'Business Services' exists at 11%, otherwise it would have to be "Any other activity not listed elsewhere" at 10% ! A Shame really.....

[ASB]

I am assuming telecoms still comes in other business services at 11%. But is your business telecoms or supplying services to telecoms companies?

If the latter you should really be using the rate appropriate to the services you provide - this may still be 11% of course.

[contractor79]

Why would you pay yourself 18k in Salary? Isn't that wasted extra Tax on the 8k above the recommended 10k?

I assume the 100k is NET? So you will also make money on the VAT Flat Rate income (assuming you are enrolled). Approximately 17.5k, but you'll only Pay Back 11k. So another 6.5k to add to your NET profit.

I was advised by accountant not to put salary too low, so took 18k.

I'm impressed it's possible to make a profit solely from the VAT but I'm wondering where the catch is. If there's no catch then it's a bit easier to stomach the tax on higher rate dividend as about half of it gets cancelled out by this nice surprise.

[rawly]

Currently anything over the tax free threshold is wasteful in terms of tax. Ignores the number of arguments about paying being worthfile for all sorts of spurious reasons.

The FRS is such as you pay your percentage on the gross billings. Thus in your example the caluclation would be:-

100k + 17.5k vat = 117.5, pay 11% (including first year discount of 1%) = 12925. Giving "profit" of 4575. This is subject to CT since it is just other income.

Most people on here would be on the 13% band, this would still yields a useful 1.8% post tax profit - less any input vat lost of course.

Yes, that's what I meant to say....

13% - Good job Telecommunications is rated lower - we obviously deserve the added incentive.........

[ASB]

Why would you pay yourself 18k in Salary? Isn't that wasted extra Tax on the 8k above the recommended 10k?

I assume the 100k is NET? So you will also make money on the VAT Flat Rate income (assuming you are enrolled). Approximately 17.5k, but you'll only Pay Back 11k. So another 6.5k to add to your NET profit.

Currently anything over the tax free threshold is wasteful in terms of tax. Ignores the number of arguments about paying being worthfile for all sorts of spurious reasons.

The FRS is such as you pay your percentage on the gross billings. Thus in your example the caluclation would be:-

100k + 17.5k vat = 117.5, pay 11% (including first year discount of 1%) = 12925. Giving "profit" of 4575. This is subject to CT since it is just other income.

Most people on here would be on the 13% band, this would still yields a useful 1.8% post tax profit - less any input vat lost of course.

[rawly]

Why would you pay yourself 18k in Salary? Isn't that wasted extra Tax on the 8k above the recommended 10k?

I assume the 100k is NET? So you will also make money on the VAT Flat Rate income (assuming you are enrolled). Approximately 17.5k, but you'll only Pay Back 11k. So another 6.5k to add to your NET profit.

[dude69]

£100k? I hate you.

I know: I always spit on the lower paid.

[THEPUMA]

Or perhaps I'm just a bit too subtle?

No I really don't think that's the case.

It's really the combination of you keep getting it wrong whilst being really aggressive and sarcastic that annoys me.

Wanna try again?

Come on, these are basics: let's at least understand the process before you start worrying about how to spend it

And then saying that you meant to get it wrong in the first place is just laughable.

Now presumably you'll say that this is all a cyber-persona and you're a really nice bloke in real life.

[VectraMan]

We've had this debate before. There are two ways to educate people - give them the answers or make them think about how to work out the answers. Which do you think I prefer? And which is more valuable, given the basic problem of how to succeed at being a freelance? You do advice and guidance for a living, I try to make people think - big difference.

Judging by this thread you prefer to give wrong answers.