Originally posted by fidot
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Flat Rate Scheme for IT contractor?
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I think for most contractors for whom the majority of their VATable expenditure will be on *services* the FRS is not worth it.
The only exception might be in your first year, as pointed out above - a) you get an extra 1% discount which might give you an extra £1k to cover any input VAT and b) if you purchase enough goods in your first year you *may* qualify for the normal flat rate (though I believe this excludes capital expenditure), although this is still unlikely.
As others said, do the calculation for the first year including the 1% discount and compare what you get to keep on the FRS with the VAT on all your estimated expenses. If the VAT is higher go standard rate, otherwise go FRS for the first year only.
I can say with confidence that after the first year you will be better off on the standard rate, unless you think paying the extra VAT is worth the slightly less paperwork (i.e. making sure you have valid VAT receipts for everything you need to reclaim on).Comment
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Originally posted by Lance View PostNope. That's not right.
£90k + VAT = £108k
16.5% of £108k = £17,820 VAT owed.
so you save £180...Comment
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Originally posted by Eirikur View Post-20% corporation taxComment
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Also need to factor in accountancy fees if not doing the VAT returns yourself. They'll likely charge more for being on standard VAT if you just chuck them a bag of receipts every quarter than on flat rate where it's much simpler for them to calculate.
So worth checking the cost of either approach with your accountant if not intending doing the returns yourself.
They are easy to do even in standard VAT form if you've only got the typical number of contracting related transactions through the company, so worth considering the accountancy fee savings anyway.Maybe tomorrow, I'll want to settle down. Until tomorrow, I'll just keep moving on.Comment
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Not sure about that. I don't know anyone who's had their fees put up and would be disappointed if they did. You pay to have your vat done as part of the package.'CUK forum personality of 2011 - Winner - Yes really!!!!Comment
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Originally posted by northernladuk View PostNot sure about that. I don't know anyone who's had their fees put up and would be disappointed if they did. You pay to have your vat done as part of the package.Comment
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Originally posted by Alan @ BroomeAffinity View PostThis is true. But bar in mind that there have been a number of changes foisted upon us recently that has increased the accountants’ workload: the new divi tax has invariably meant the second shareholder requires a tax return where previously they didn’t. There is pressure on our margins so it’d be understandable if the fees were to rise for standard VAT contractors. I’m not aware of anyone who has linked a fee rise specifically to this but it’s probably no coincidence that fees in general have risen of late. Not ours though :-)'CUK forum personality of 2011 - Winner - Yes really!!!!Comment
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Originally posted by northernladuk View PostLooks like you'll have to do drop the luxury pack on the next Bentley and opt for the bog standard one next year won't you.Comment
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Originally posted by northernladuk View PostNot sure about that. I don't know anyone who's had their fees put up and would be disappointed if they did. You pay to have your vat done as part of the package.
Though in the context of the OP and being new to the game, then the discussion with a new accountant on how the services will be delivered and what is required in the form of paperwork would dictate the cost of the service.
For example I could have just tagged and bagged all the paperwork and handed it over to my accountant to sift through and sort out, but it would have cost more than the approach we agreed, where I would spreadsheet it all ensuring it tied up to the company bank statements and provided supplemental paperwork only where required and requested by the accountant.
I suppose the difference may be in accountant approaches, where some offer a full flat rate monthly charged service (so should see no real difference when moving between standard/flat rate) and some offer a tailored service so can pick and choose which bits you are comfortable doing yourself (if any) to reduce the overall fees and only pay for work done as it is done.
All part of the 'joys' of being new to contracting deciding which of those paths to go down and when it may be worth changing paths.Maybe tomorrow, I'll want to settle down. Until tomorrow, I'll just keep moving on.Comment
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