Reply to: My newbe understanding of VAT

[Brian Potter]

If you don't have your bank details ready in time then you'll just miss an invoice and get paid double next time.

It does take a while to actually get registered for VAT etc (couple of weeks each).

The OP may fail at the compliance stage. He/she needs ALL details to hand or else no decent 'pay on time' agency will deal with him/her.

Why do people entertain cutting corners? This is a business, so act like one.

[Brian Potter]

I will never go umbrella. It sucks even more than what i tax currently in Hungary.

I doubt that very much.

[SpontaneousOrder]

If you don't have your bank details ready in time then you'll just miss an invoice and get paid double next time.

It does take a while to actually get registered for VAT etc (couple of weeks each).

[gabox01]

You need to do business with an accountant BEFORE you have a signed contract. Takes no time to set up a Ltd Co but does take a few weeks to set up an accountant, PAYE, Flat Rate VAT, business bank AC etc. Agents will expect you to hand over such details of your Ltd Co within days of a contract offer, so you need to be ready.

Well, I asked SJD and they said it takes 3 hours for them to create a limited, and it takes 7-10 days to open a bank account. I'm not sure about the rest, but it seems there is no reason to hurry with these things.

My advice? Go umbrella for your first gig and use the time to research all the ins and outs of operating as a Ltd Co. If you like what you see then set up your Ltd Co, accountant, PAYE, VAT etc. whilst still working under the umbrella. If you get an extension then use the Ltd, but if you get benched then at least you have the Ltd ready for the next gig. Simples!

I will never go umbrella. It sucks even more than what i tax currently in Hungary.

[Brian Potter]

I will definitely do business with SJD after i have a signed contract. I don't have that yet.

You need to do business with an accountant BEFORE you have a signed contract. Takes no time to set up a Ltd Co but does take a few weeks to set up an accountant, PAYE, Flat Rate VAT, business bank AC etc. Agents will expect you to hand over such details of your Ltd Co within days of a contract offer, so you need to be ready.

My advice? Go umbrella for your first gig and use the time to research all the ins and outs of operating as a Ltd Co. If you like what you see then set up your Ltd Co, accountant, PAYE, VAT etc. whilst still working under the umbrella. If you get an extension then use the Ltd, but if you get benched then at least you have the Ltd ready for the next gig. Simples!

Yes there is SJD, but there is also Nixon Williams. Whilst I was under an umbrella I set up my Ltd Co towards the end of the gig and took advantage of NW's 3 months for £150 to carry me through bench time to the gig I have now, fortunately my bench time was around 5 weeks...not sure if NW do that offer any more but it's worth asking them.

[speling bee]

I have an accountant, but she doesn't know anything about taxation outside of HUN.
I will definitely do business with SJD after i have a signed contract. I don't have that yet.

I guess it's not appropriate to ask questions from them free of charge.

They will very probably give you an hour of their time first for free. Please take it.

[gabox01]

If you speak to an accountant he/she can answer all of the questions you've posted in a matter of minutes (assuming you listen and aren't just a trolling sockpuppet). The questions you have ARE the basics.

I have an accountant, but she doesn't know anything about taxation outside of HUN.
I will definitely do business with SJD after i have a signed contract. I don't have that yet.

I guess it's not appropriate to ask questions from them free of charge.

[TykeMerc]

I will do Sir, just want to understand the basics before that.

If you speak to an accountant he/she can answer all of the questions you've posted in a matter of minutes (assuming you listen and aren't just a trolling sockpuppet). The questions you have ARE the basics.

[gabox01]

For the love of God, spend an hour sat down with an accountant who specialises in contractors.

I will do Sir, just want to understand the basics before that.

[speling bee]

Thanks for the great answers.
Most likely i will utilize flat rate scheme in my first year, and think about expenses after.

For the love of God, spend an hour sat down with an accountant who specialises in contractors.

[gabox01]

Thanks for the great answers.
Most likely i will utilize flat rate scheme in my first year, and think about expenses after.

[TheCyclingProgrammer]

Also worth remembering that VAT is not and never will be your money. The bit you get back from HMRC for using the Flat Rate scheme is your reward for saving them some paper work (it helps if you think about who it was meant to help; people like small shops and pubs that have multiple line items with multiple VAT treatments. It's not actually about giving us money for free).

It's also worth remembering that the bit you get back from the FRS is earned income so is liable to CT, so you only get to keep 80% of your 6.5%.

Also worth remembering that the flat rate surplus is intended to cover your input VAT that you can't reclaim, so your true gross profit from the FRS is FRS surplus less all unreclaimed input VAT, which is then, as you say, taxed as normal profit.

If your input VAT over the course of a year exceeds your FRS surplus you should consider coming off the FRS. Realistically most contractors should find the scheme profitable, but keep an eye on your expenses.

[malvolio]

Also worth remembering that VAT is not and never will be your money. The bit you get back from HMRC for using the Flat Rate scheme is your reward for saving them some paper work (it helps if you think about who it was meant to help; people like small shops and pubs that have multiple line items with multiple VAT treatments. It's not actually about giving us money for free).

It's also worth remembering that the bit you get back from the FRS is earned income so is liable to CT, so you only get to keep 80% of your 6.5%.

[speling bee]

I see a job post that says 400 GPB/day.
We make a contract, and I charge them 400+VAT.
VAT is 20% so they pay me 480 GPB/day gross.
In my first year, from that 20% i pay back 13.5%, keeping 6.5%.
Let's pretend that i don't care about other taxations, my net daily rate is 426,5 GPB.

Is this correct?

What is your trade?

Some of us are management consultants, lopping 0.5% off the 13.5%.

[Pondlife]

Before you start a new thread asking...

http://forums.contractoruk.com/accou...-requests.html

You're welcome.