Should I go VAT eegistered?

[Testing123]

I think OP is imagining that the VAT will come out of his daily rate.

It doesn't - you add it on.

So if you're on £300 a day, yourCo invoices for £300 + 20% VAT = £360. (The agent claims back the £60, so it doesn't cost him anything)

YourCo then give the vat man 14.5% of the £360 = £52.20. So yourCo keeps the extra £7.80 per day (which is then subject to corp tax)

Note that in your first year you get a 1% discount, so you're even better off!

Hi All

thanks for the responses, not sure why I didn't get any notifications.

coincidentally, I met an IT contractor who is also an accountant at a friends and family gathering this weekend, so reassured me my accountant had set me up in the correct manner, and explained things clearly.

Mudskipper - thanks for the clear answer, much appreciated.

[mudskipper]

I think OP is imagining that the VAT will come out of his daily rate.

It doesn't - you add it on.

So if you're on £300 a day, yourCo invoices for £300 + 20% VAT = £360. (The agent claims back the £60, so it doesn't cost him anything)

YourCo then give the vat man 14.5% of the £360 = £52.20. So yourCo keeps the extra £7.80 per day (which is then subject to corp tax)

Note that in your first year you get a 1% discount, so you're even better off!

[northernladuk]

Ive searched, and searched again, and maybe one of you will point out I didnt search enough, but I cannot see a thread in relation to this query.

Something like this?

https://www.google.co.uk/search?q=va...ntractoruk.com

[kal]

For the vast majority of people, yes, but at the risk of being highly pedantic, you may wish to retain the ability to claim VAT on capital assets < £2k if most or all of your business is outside of the scope of VAT.

True, I was commenting along the lines of contractors like myself who predominantly charge VAT on services with very little other VATable expenditure, sorry should have made that clear!

[Craig@Clarity]

For the vast majority of people, yes, but at the risk of being highly pedantic, you may wish to retain the ability to claim VAT on capital assets < £2k if most or all of your business is outside of the scope of VAT.

To add: or if you're buying and selling, say, computer goods or parts or you have rental income from company owned property but that's another thread!

[jamesbrown]

It's free money so why wouldn't you do it? Every Ltd contractor I know does...

For the vast majority of people, yes, but at the risk of being highly pedantic, you may wish to retain the ability to claim VAT on capital assets < £2k if most or all of your business is outside of the scope of VAT.

[TheCyclingProgrammer]

It's free money so why wouldn't you do it? Every Ltd contractor I know does...

Almost free...you really ought to deduct all the input VAT you pay over the year that you would have been able to reclaim on the standard VAT scheme to work out your flat-rate scheme "profit" (or "free money" as you put it). If you pay a lot of input VAT, it might be better to be on the standard scheme.

[kal]

You didn't think I said DON'T register did you?

No, not at all , Copied the wrong quote!

[Craig@Clarity]

It's free money so why wouldn't you do it? Every Ltd contractor I know does...

You didn't think I said DON'T register did you?

[TheFaQQer]

Apologies for my ignorance, but the business world, taxation, VAT etc is all new to me, and I’m still trying to make sense of it all.

Stop now and question whether you know enough to run a company, then. Make sure you know what you are doing before it's too late.

As it stands, I would pay a VAT amount every month of 14.5% and pocket the difference between that and 20%.

No you wouldn't - that's not how the flat rate scheme works.

What I don’t understand is do I have to be VAT registered?

Link

If I don’t go VAT registered, would I be paying more corporation tax per month?

No. Because corporation tax isn't paid monthly.

the more I think about it, I think maybe the accountant as pre-emptied that I would have a good year, and to save him both time and hassle and mine, that he would just VAT register me from the off.

It doesn't save anyone time and hassle to be registered. If you don't need to be, and don't want to be, then don't register - there will be less paperwork if you aren't.

I kind of resent paying £££'s per month for VAT AND tax.

What tax do you pay monthly?

if I dont need to be VAT registered, then I dont want to. this would save me £££'s each month surely?

How do you think it costs or saves you any money?

[kal]

You don't have to be VAT registered unless your turnover goes over the £81k threshold but I'd be inclined to go with your accountant's advice. Even if you don't have to register, you're not losing out financial assuming you're doing business with another VAT registered business e.g. an agency.

Basically, you would charge 20% VAT on your sales, the client pays you this and you simply pass it onto the VAT man. In reality, you're his VAT collector. Under FRS VAT though, just to correct a minor point, you would pay 14.5% of the GROSS invoice amount (Net + 20%) not 14.5% of 20% VAT.

It's free money so why wouldn't you do it? Every Ltd contractor I know does...

[Craig@Clarity]

You don't have to be VAT registered unless your turnover goes over the £81k threshold but I'd be inclined to go with your accountant's advice. Even if you don't have to register, you're not losing out financial assuming you're doing business with another VAT registered business e.g. an agency.

Basically, you would charge 20% VAT on your sales, the client pays you this and you simply pass it onto the VAT man. In reality, you're his VAT collector. Under FRS VAT though, just to correct a minor point, you would pay 14.5% of the GROSS invoice amount (Net + 20%) not 14.5% of 20% VAT.

[Testing123]

Ive searched, and searched again, and maybe one of you will point out I didnt search enough, but I cannot see a thread in relation to this query.

Hi

I am currently in the process of setting up a LTD company to become an IT contractor. My accountant has advised me that I should register to be VAT registered, as I can claim, as an IT contractor, the flat rate scheme (14.5%) but charge at the full VAT rate (20%)

Apologies for my ignorance, but the business world, taxation, VAT etc is all new to me, and I’m still trying to make sense of it all.

As it stands, I would pay a VAT amount every month of 14.5% and pocket the difference between that and 20%.

What I don’t understand is do I have to be VAT registered? Yes, ok, I maybe entitled to the difference, but surely saving 1000’s per month outweighs the difference?

If I don’t go VAT registered, would I be paying more corporation tax per month?

the more I think about it, I think maybe the accountant as pre-emptied that I would have a good year, and to save him both time and hassle and mine, that he would just VAT register me from the off.

I kind of resent paying £££'s per month for VAT AND tax.

if I dont need to be VAT registered, then I dont want to. this would save me £££'s each month surely?

Cheers for all your advice.