Do Umbrella companies benefit from collecting VAT?

[DallasDad]

Just curious
When an agency is invoiced the umbrella adds VAT.
Does the Umbrella pay that full 20% to HMRC or do they benefit from something akin the the flat rate scheme for acting as the tax collector if so what sort of percentage?

Thanks

[SueEllen]

Nope.

Nearly all will have a large enough turnover so won't be legible for the flat rate scheme.

[TheFaQQer]

Nope.

Nearly all will have a large enough turnover so won't be legible for the flat rate scheme.

And if they don't, run like hell

[ContrataxLtd]

The do benefit by being able to reclaim the VAT on the employees expenses though, especially employee mileage as the VAT soon mounts up on this!

[LondonManc]

The do benefit by being able to reclaim the VAT on the employees expenses though, especially employee mileage as the VAT soon mounts up on this!

How profitable will they be then come April?

[ContrataxLtd]

How profitable will they be then come April?

Possibly not very, guess it depends on how well they are setup....

[Waldorf]

Possibly not very, guess it depends on how well they are setup....

Quite, this played quite a chunk of profits on the umbrella business model, they used to make quite a wedge from the interest on clients money before paying it out and to HMRC but with interest rates so low this is another hit.

I can't see a long term future for brollies, indeed I'd go as far to say that some will go bust, leaving many clients out of pocket when they finally close the door. You have been warned.

[TheFaQQer]

How profitable will they be then come April?

Many aren't that profitable at the moment, eg.

One umbrella (2014) - turnover £39 million, Cost of sales £38 million, gross profit £766k, wages £470k, directors £138k => operating profit £61k

Same umbrella company (2013) - turnover £35 million, cost of sales £34million, gross profit £664k, wages £513k, directors £136k => operating loss £49k

Another one I checked - turnover £348 million, operating profit £838k (although they did pay their directors £4.5 million)

As a percentage of turnover, it's not that great - but at least you can always run away with the cash and leave the employees behind

[SlipTheJab]

Many aren't that profitable at the moment, eg.

One umbrella (2014) - turnover £39 million, Cost of sales £38 million, gross profit £766k, wages £470k, directors £138k => operating profit £61k

Same umbrella company (2013) - turnover £35 million, cost of sales £34million, gross profit £664k, wages £513k, directors £136k => operating loss £49k

Another one I checked - turnover £348 million, operating profit £838k (although they did pay their directors £4.5 million)

As a percentage of turnover, it's not that great - but at least you can always run away with the cash and leave the employees behind

Should be enough left in the kitty for a canoe and a map of how to get to Panama

[ContrataxLtd]

Many aren't that profitable at the moment, eg.

One umbrella (2014) - turnover £39 million, Cost of sales £38 million, gross profit £766k, wages £470k, directors £138k => operating profit £61k

Same umbrella company (2013) - turnover £35 million, cost of sales £34million, gross profit £664k, wages £513k, directors £136k => operating loss £49k

Another one I checked - turnover £348 million, operating profit £838k (although they did pay their directors £4.5 million)

As a percentage of turnover, it's not that great - but at least you can always run away with the cash and leave the employees behind

I wonder just how much that £61k operating profit is going to be hit by not having the VAT reclaim in there. I reckon, just using some very very rough figures that the whole £61k could be wiped out in an instant come April 16 just because mileage can't be claimed anymore.

687 employees each doing an average of about 4500 miles per annum could lead to a VAT reclaim of £61k.......