Newbie Contractor

[Contreras]

But the VAT scheme set up can take up to 8 weeks.

I'm sure the accountants on here would have a better idea but I know of someone who had VAT registration recently in < 4 weeks and that included the Christmas period, so there's a good chance if you get the application in right away (it can be done online) then the company may have a VAT no. by the time you raise the first invoice.

Edit: IIRC, you can't apply for VAT registration until the Company has a business bank account set up, so that is also factor to plan ahead for.

How would this work in the interim i.e. I don't have a VAT number but I need to start billing my agency. Would I bill them excluding VAT and then send a VAT only invoice for the previous invoices when the VAT number arises or just forget about the VAT on the previous invoices.

Neither. You charge the VAT (but don't call it that) and then re-issue the invoice when you have a VAT no.

HM Revenue & Customs: Waiting for VAT registration and what to do in the meantime

See also HM Revenue & Customs: VAT invoices: what they must show for some important detail.

[Greg@CapitalCity]

PS any recommendations around particular organisations to use for company setup would be appreciated.

I think the Companies House service is hard to beat. You can access it through;
Incorporate your company online | Business Link

[Greg@CapitalCity]

Though the position ought to be clear lack of agreement from HMRC made me tread cautiously and not join the FRS.

Yep, fair enough, the tax implications would be significant. Note they did change their rules on Place of Supply on 01 Jan 2010, maybe you were looking at this before then? If you are in the UK and the place of supply of your service is in another EU country, the supply is outside the scope of UK VAT. Take a look at the place of supply guidance again - it might have changed since you last looked, and may give you greater comfort that you're OK. Take a look at this link - you you make B2B supplies to an EU member state, you look to be on solid ground;
HM Revenue & Customs

The HMRC are impossible to nail down on queries like this - frustrating aye!

[ASB]

Huh? If its outside the scope of VAT, it stays out of the flat rate VAT calculation. Actually.....I see your point, the supply may be 'Exempt', which then does cause flat rate VAT problems. To the OP, check if the supplies your partner will make are exempt from VAT. If they are, it might be better she starts her own company, or if the work will be piecemeal to start with (and not through any agency), perhaps she just registers as a self-employed person.

This may (or may not ) help;
HM Revenue & Customs

Greg,

It is the case that if something is outside the scope of VAT then it is excluded from the turnover for FRS. However, I recall when I was looking at FRS 90% of my turnover was to EU companies the balance UK.

Clearly the rules place this as exempt, so I was going to join the FRS. However the VAT office was not prepared to give a definitive statement and agree this (strictly I think they could only give post transaction approval). My fear was that they could potentially argue later that they were zero-rated which would have been expensive.

Though the position ought to be clear lack of agreement from HMRC made me tread cautiously and not join the FRS.

[JamJarST]

Thanks for all the info.

Yes I misunderstood the flat rate structure, thanks Scrag Meister for pointing it out. Looks likes it around 2.6% benefit (3.8% in the first year), Enough to pay for lunch and drinks!!!!

Regarding the Social Care, She wont be contracting actual physical social work i.e. as a care worker but more around doing some Research type consulting in that field and reviewing care homes etc and I think it fits into one of the categories mentioned in the flat rate scheme at 11% on that basis.Think will continue to have a combined company rather than separate top ease paperwork/admin.

Just waiting to get my contract through from the agency for the role including something they referred to as an Outside IR35 Compliant statement I presume this is to coordinate the contract which is outside of the IR35 Rules and my working practices to ensure I act in a way that is outside of the IR35 Rules. Would like to know what you guys think about this and whether this compliant statement is just a matter of course or not.

Next Steps for me it seems is to set up a Ltd company and get registered on the flat rate scheme. I know the ltd company set up wont take up a long time as there are services online or could go direct to companies house. But the VAT scheme set up can take up to 8 weeks. How would this work in the interim i.e. I don't have a VAT number but I need to start billing my agency. Would I bill them excluding VAT and then send a VAT only invoice for the previous invoices when the VAT number arises or just forget about the VAT on the previous invoices.

Finally I understand you are not mandated to name a company secretary anymore for a limited company, are there and pros and cons around this.

PS any recommendations around particular organisations to use for company setup would be appreciated. Not looking for an accountant as I plan to do the books myself or with the Mrs. Just a company to get the company up and give me copies of documents and templates of company minutes and dividend vouchers etc.

Thanks again

I think they are trying to con you into signing an Opt Out statement. Read the sticky on here about why this might not be a good idea. As for being inside or outside IR35, get the contract reviewed by an expert and make sure you understand the rules. There are very good guides on here to help.

[dyven]

Thanks for all the info.

Yes I misunderstood the flat rate structure, thanks Scrag Meister for pointing it out. Looks likes it around 2.6% benefit (3.8% in the first year), Enough to pay for lunch and drinks!!!!

Regarding the Social Care, She wont be contracting actual physical social work i.e. as a care worker but more around doing some Research type consulting in that field and reviewing care homes etc and I think it fits into one of the categories mentioned in the flat rate scheme at 11% on that basis.Think will continue to have a combined company rather than separate top ease paperwork/admin.

Just waiting to get my contract through from the agency for the role including something they referred to as an Outside IR35 Compliant statement I presume this is to coordinate the contract which is outside of the IR35 Rules and my working practices to ensure I act in a way that is outside of the IR35 Rules. Would like to know what you guys think about this and whether this compliant statement is just a matter of course or not.

Next Steps for me it seems is to set up a Ltd company and get registered on the flat rate scheme. I know the ltd company set up wont take up a long time as there are services online or could go direct to companies house. But the VAT scheme set up can take up to 8 weeks. How would this work in the interim i.e. I don't have a VAT number but I need to start billing my agency. Would I bill them excluding VAT and then send a VAT only invoice for the previous invoices when the VAT number arises or just forget about the VAT on the previous invoices.

Finally I understand you are not mandated to name a company secretary anymore for a limited company, are there and pros and cons around this.

PS any recommendations around particular organisations to use for company setup would be appreciated. Not looking for an accountant as I plan to do the books myself or with the Mrs. Just a company to get the company up and give me copies of documents and templates of company minutes and dividend vouchers etc.

Thanks again

[Greg@CapitalCity]

On the subject of VAT, the fact that she will be contracting in the "social care sector" might suggest that the services would be outside the scope of VAT so being on the flat rate scheme could present problems as you would have to apply the flat rate to ALL of the turnover.

Huh? If its outside the scope of VAT, it stays out of the flat rate VAT calculation. Actually.....I see your point, the supply may be 'Exempt', which then does cause flat rate VAT problems. To the OP, check if the supplies your partner will make are exempt from VAT. If they are, it might be better she starts her own company, or if the work will be piecemeal to start with (and not through any agency), perhaps she just registers as a self-employed person.

This may (or may not ) help;
HM Revenue & Customs

[Scrag Meister]

along side the Flat Rate VAT Scheme to obtain the 5.5 - 6.5% extra on the rate.

If you are talking about the difference between 20% standard VAT and the 13.5% 1st year/14.5% charged using the FRS, then these rates are charged against Gross billing, so the actually additional amount isn't that high.

I think it works out nearer to 2.5% to 3% of sales.

[v8gaz]

It may also have benefits in view of the crazy tests the PCG are about to foist on the contracting world - having more than one person generating revenue could be an advantage.

Other small factors may be how much accountants would charge for one company versus two.

You seem to be either badly informed or paranoid delusional. PCG are not foisting anything on anyone.

[Alan @ BroomeAffinity]

On the subject of VAT, the fact that she will be contracting in the "social care sector" might suggest that the services would be outside the scope of VAT so being on the flat rate scheme could present problems as you would have to apply the flat rate to ALL of the turnover.

[Greg@CapitalCity]

Will we be best of starting the Limited company with her as a Director as well and a shareholder, and if so what would be the best course of action when registering the company i.e. do we need to categories the business in some way to deal with both areas of the business.

You are on safe footing here. A company can do more than one thing - gone are the days when the Articles spell out what the company does to earn its money.

Also, on the flat rate VAT scheme, register under the trade sector where most of your revenue will be coming from (probably IT by the sounds). Once your wife starts working, and you both decide to share the company, she will also charge VAT on her invoices, and VAT due to the HMRC for her income will be worked on using your IT trade sector percentage.

[TaxedToDeath]

And...

Nowt wrong with you both working through the same company.

It may also have benefits in view of the crazy tests the PCG are about to foist on the contracting world - having more than one person generating revenue could be an advantage.

Other small factors may be how much accountants would charge for one company versus two.

[Sockpuppet]

Nowt wrong with you both working through the same company.

[dyven]

Hi All,

Hopefully I have just negotiated my first contracting role which is for 6 months in the IT Sector. I have more or less decided to go with the Limited Company set up along side the Flat Rate VAT Scheme to obtain the 5.5 - 6.5% extra on the rate.

Now here's the thing my Wife who is currently employed and on Maternity leave is also looking at doing some contracting work but this will be in the Social Care Sector and to be honest wont really be active for 8 months or so.

Will we be best of starting the Limited company with her as a Director as well and a shareholder, and if so what would be the best course of action when registering the company i.e. do we need to categories the business in some way to deal with both areas of the business.

Thanks in advance.

Regards