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| CURRENT SECTION :: IR35 / IR591 | UK's most visited IT Contractor Site - 250k unique visitors March 2008 |
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The VAT Flat Rate Scheme now seems attractive for IT consultants. The flat rate VAT percentage applying to IT consultants has dropped from 14.5% to 13% with effect from 1st January. If your turnover is under £150,000 pa you will be eligible to join. To give an example, a contractor with a turnover of £50,000 pa will be able to claim £1112.50 pa in input tax, compared with just £231 pa before the changes. For new registrations there is an additional 1% discount for 12 months. The calculation works as follows: Sales Add VAT at the usual rate of 17.5% Equals gross sales. You then take 13% of that figure and that is the amount you have to pay to Customs and Excise for VAT each quarter. You will no longer claim VAT on expenses. To decide whether you wish to join the scheme, take your current turnover, apply the formula as above and compare that with how much VAT you currently claim on expenses. Judging by the average claim, it would seem well worth joining. To join the scheme, you need to complete and submit form VAT 600 FRS which is available here: http://www.hmce.gov.uk/business/services/vat-600-frs-application.doc There is also a useful calculator which is here: http://212.100.226.149/hmc/index.jsp The scheme may not be used until Customs & Excise have approved your application, but approval once issued will be from the date you have requested. For those contractors caught by IR35, the deemed salary will be calculated on the gross turnover reduced by 13%, so the saving before input tax will be fully taxed under IR35. You are currently free to leave the scheme at any time. Our thanks to SJD Accountancy for this story Jan 7, 2004 Email this article Printer friendly page Previous Page
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