Reply to: Flat Rate & Invoice Payments

[Contreras]

Come on - it's his mate and its a tax fiddle. Allegedly...

Yeah but if it's a tax fiddle don't you want to know how?

Personally I can't see how taking on a self employed contractor (even if it is oneself) could possibly avoid any VAT or other tax, but if it does then I want to know about it.

One thing that has not been mentioned yet is that the self employed 'mate' will need to take care of their own NI contributions, and if they fail to do so then the 'employer' becomes liable.

[northernladuk]

Come on - it's his mate and its a tax fiddle. Allegedly...

Unfortunately that is exactly how I see it as I mentioned in the other thread. It just doesn't seem right. Problem is we get so many people presenting us figures without telling us why and then later on the truth comes out and it's been a complete waste of time so the OP may incorrectly being tarred with the wrong brush.... but the fact there are two threads on this and it is going on and on makes me think otherwise...

Surely this other guy has been invoiced by ltd's before so should be able to advise you how he would like it done.... unless you are setting a scam up not understand either side of course....

[stek]

LOL, no.

Scroll up... read what SarahL says and ignore the mischief makers.

Come on - it's his mate and its a tax fiddle. Allegedly...

[Contreras]

Sorry, am I doing something wrong here?

LOL, no.

Scroll up... read what SarahL says and ignore the mischief makers.

[Sockpuppet]

You and me both baby!

[stek]

Thanks for your reply. I am very new to this field so confused a bit about the work Capital. Sorry for being pain in the neck.
I may have to pay him around 10K. We are trying to develop a software on my company's name. The software which we will be developing is any how related to word "Capital"?

Regards
GMans.

You won't be paying 'him' anything, your Ltd will.

Who is this 'him' - a friend or relation? I have a suspicious mind....

[Clare@InTouch]

Thanks for your reply. I am very new to this field so confused a bit about the work Capital. Sorry for being pain in the neck.
I may have to pay him around 10K. We are trying to develop a software on my company's name. The software which we will be developing is any how related to word "Capital"?

Regards
GMans.

Capital means capital equipment - usually larger items that a business buys that will last for more than a year. A computer, a van, certain other plant & equipment.

That doesn't seem to be the case here, was just adding it for completeness (otherwise someone would have jumped in and corrected me for not mentioning it )

[Goodmans]

We are all assuming it's an IT contractor, he might be getting his roof fixed on the Ltd's dollar.....

Sorry, am I doing something wrong here?

[Goodmans]

If you're on flat rate then you pay a percentage of your sales income to HMRC - purchases don't have any effect (unless capital over £2,000).

Thanks for your reply. I am very new to this field so confused a bit about the work Capital. Sorry for being pain in the neck.
I may have to pay him around 10K. We are trying to develop a software on my company's name. The software which we will be developing is any how related to word "Capital"?

Regards
GMans.

[stek]

You just pay their invoice (without VAT) as normal. When charging your client you add VAT. I doubt it'll qualify as a disbursement, so you'd need to add VAT to your whole sales invoice, even if it partly relates to work where you paid a non VAT registered business.

In short, this won't hurt you at all. If on the other hand you subbed work out to a contractor who WAS VAT registered, then being on the FRS would hurt you...so bear this in mind if you're likely to subcontract work often.

We are all assuming it's an IT contractor, he might be getting his roof fixed on the Ltd's dollar.....

[Maslins]

You just pay their invoice (without VAT) as normal. When charging your client you add VAT. I doubt it'll qualify as a disbursement, so you'd need to add VAT to your whole sales invoice, even if it partly relates to work where you paid a non VAT registered business.

In short, this won't hurt you at all. If on the other hand you subbed work out to a contractor who WAS VAT registered, then being on the FRS would hurt you...so bear this in mind if you're likely to subcontract work often.

[Clare@InTouch]

If you're on flat rate then you pay a percentage of your sales income to HMRC - purchases don't have any effect (unless capital over £2,000).

[Goodmans]

I guess, i confused you all.

I am a director of a LTD company ABC Ltd. VAT(flat rate) registered.

I have recruited a contractor XYZ (who is self employed contractor) to develop a software for me. For that he will be charging me some money through invoice. It means i am buying his services.

As he is not VAT registered. he will be invoicing me with out any VAT. in that case should i pay any VAT(any rate) to HMRC?

Some one said i dont have to do anything if I (ABC Ltd) on Normal Flat rate. But there will be slight changes if i am on Flat Rate(Which I am on now). what are they?

Regards
GMans.

[SarahL2012]

If the contractor you want to use isn't registered for VAT then you're in luck I think. He can invoice you without adding VAT onto the invoice (because he isn't registered) and then you can pay over VAT as normal under the usual flat rate rules.

The problems arise when you use a contractor who has to charge you VAT. If you're paying VAT under the flat rate rules then you can't claim back the VAT on their invoice and you can suffer financially.

[Clare@InTouch]

If you're FRS registered then you simply pay a percentage of your sales over to HMRC. It doesn't matter whether your suppliers are VAT registered, FRS registered, or not registered at all (other than that may charge less if not registered).