VAT in IR35, does the Governement lose out ?

[AnthonyQuinn]

Hi all,

I'm new in here.

Quick question, currently being outside IR35 and operating as a PSC Ltd company I charge the VAT to the Client and pay the government this back via the Flat rate scheme.
Now, if I go inside IR35 does this mean there is no VAT paid for my PAYE services i.e if I go inside IR35 does the government lose out on all that VAT...?

do you understand how VAT works? The end client nets off any VAT paid to you before paying HMRC. If they dont pay you, they pay that to HMRC. Indeed HMRC actually make more now if you had been on the flat rate VAT scheme earlier

[PaulCooper1969]

Siemens charges VAT on their sales, pays VAT on their purchases and pays the difference between the VAT they collect and the VAT they pay to suppliers to HMRC.

If you move from limited company to PAYE within Siemens the VAT you collected will just be paid to HMRC by Siemens as they are paying less out to suppliers.
If you move to an umbrella the umbrella will charge Siemens VAT and pay it to HMRC.

In both cases nothing changes on the VAT front...

Thanks.

[eek]

Thanks for the response.

And apologies for my lack of understanding, but does that mean I am right ?

Currently work for Siemens and they pay me VAT with my day rate, so if I go inside IR35 and therefore PAYE does that mean Siemens no longer has to pay me/the agency/the government the VAT ?

Siemens charges VAT on their sales, pays VAT on their purchases and pays the difference between the VAT they collect and the VAT they pay to suppliers to HMRC.

If you move from limited company to PAYE within Siemens the VAT you collected will just be paid to HMRC by Siemens as they are paying less out to suppliers.
If you move to an umbrella the umbrella will charge Siemens VAT and pay it to HMRC.

In both cases nothing changes on the VAT front...

[PaulCooper1969]

If you had been clearer I would have used my stock answer that inter-company VAT is considered Revenue neutral by HMRC (regardless of the fact Banks may not be able to claim it back).

Thanks for the response.

And apologies for my lack of understanding, but does that mean I am right ?

Currently work for Siemens and they pay me VAT with my day rate, so if I go inside IR35 and therefore PAYE does that mean Siemens no longer has to pay me/the agency/the government the VAT ?

[eek]

The point I was trying to make was, if the client no longer has to pay VAT for my services (if I go inside IR35) then surely this means;

1) the client saves themselves the 20% VAT charge - and can then afford to pay the Employers NI, and give me a raise !

2) the government will no longer get the VAT payment - hence will lose out on a considerable VAT take from all previously designated PSC contractors moved inside IR35.

If you had been clearer I would have used my stock answer that inter-company VAT is considered Revenue neutral by HMRC (regardless of the fact Banks may not be able to claim it back).

[PaulCooper1969]

The point I was trying to make was, if the client no longer has to pay VAT for my services (if I go inside IR35) then surely this means;

1) the client saves themselves the 20% VAT charge - and can then afford to pay the Employers NI, and give me a raise !

2) the government will no longer get the VAT payment - hence will lose out on a considerable VAT take from all previously designated PSC contractors moved inside IR35.

[PaulCooper1969]

Thanks for the responses.

Sorry for the misunderstanding....I was trying to understand that if the government goes thru with this IR35 reform in the private sector does it mean that, for example if all current outside IR35 contractors have to move inside IR35, does this mean the government will lose out on all the VAT they would have received from each PSC ?

If so surely the governments 'take' of VAT will therefore go down for each PSC that moves to inside IR35 - hence the government might get a little more PAYE tax etc but will lose out substantially on all the VAT payments..?

[eek]

Hi all,

I'm new in here.

Quick question, currently being outside IR35 and operating as a PSC Ltd company I charge the VAT to the Client and pay the government this back via the Flat rate scheme.
Now, if I go inside IR35 does this mean there is no VAT paid for my PAYE services i.e if I go inside IR35 does the government lose out on all that VAT...?

If you are PAYE your limited company won't be involved so VAT is completely irrelevant to your question.

[WTFH]

Hi all,

I'm new in here.

Quick question, currently being outside IR35 and operating as a PSC Ltd company I charge the VAT to the Client and pay the government this back via the Flat rate scheme.
Now, if I go inside IR35 does this mean there is no VAT paid for my PAYE services i.e if I go inside IR35 does the government lose out on all that VAT...?

Bad news, the government doesn't lose.

Your concern shouldn't be about the government losing, but about how you're going to work after April, and if you are happy with the money you will earn after that date, don't worry about the % everyone else may or may not get.

[PaulCooper1969]

Hi all,

I'm new in here.

Quick question, currently being outside IR35 and operating as a PSC Ltd company I charge the VAT to the Client and pay the government this back via the Flat rate scheme.
Now, if I go inside IR35 does this mean there is no VAT paid for my PAYE services i.e if I go inside IR35 does the government lose out on all that VAT...?