"In the UK, daily rates quote include VAT"

[danmaz74]

Hi all, I'm new here and my name is Dan!

I was contacted by an agency about a 6 months IT position in London (where I would need to move to). I said that I could be interested if the rate was so that I could make at least 100K/year gross. They came out with a daily rate of £416/day, which looked a bit low to me (my accounting would be; 100,000/220 = 454), and on which according to them I would only pay "a 20% tax rate". I did a phone screening interview with the customer and was invited there for a face to face, with a an offer raised to 436/day.

But at that point I asked to understand better what I would actually pay in taxes, and after insisting with questions (they were rather evasive) they admitted that the quoted daily rate was VAT included. Which, from my experience in continental Europe, is something I've never heard of; but they insisted it was standard practice in the UK to advertise daily rates VAT included (which IMHO doesn't make sense, because the customer can reclaim VAT anyway, and the contractor could even not pay and charge VAT at all from what I read about the UK).

So I have two questions:

• is quoting a rate "VAT included" really a common (if not standard) practice in the UK? From searching the internet it looks like that's not the case, but I didn't find a very clear confirmation
• if you're getting paid let's say 100K/year VAT included (ie 83K + VAT) with your own Ltd company, is the "20% tax rate" even close to realistic?

I'd like to know about this before getting really angry with them

Thanks!

[Old Greg]

Deep breath, folks.

[NotAllThere]

Thread moved.

Is quoting a rate "VAT included" really a common (if not standard) practice in the UK?

Absolutely not, though it's not unheard of for agencies to argue that it is.

Is the "20% tax rate" even close to realistic?

It depends, but it sounds very much like more agency flannel. 19% is the corporation tax rate. If you pay yourself a low enough salary and dividends, then you might only pay 20% income tax. But then there's ERNIC and EENIC. If you're caught by IR35, then 20% is just wrong.

[northernladuk]

Just be careful not to get sucked in to any scheme promising returns of 85% and even as high as 95% retention rates. They are loan schemes and to be avoided at all costs.

Here are a couple of threads where people discuss their % take home which I think is what you are after.

https://forums.contractoruk.com/acco...ercentage.html

https://forums.contractoruk.com/gene...centage-2.html

https://forums.contractoruk.com/busi...take-home.html

Remember these are highly dependant on peoples circumstances so a very rough rule of thumb.

[adubya]

The agency have lied to you* in order to earn themselves more of the slice of the day rate the client pay.

No change there then.

Even if you were getting the full £436/day, that's not much for London with all the associated cost/hassle.

Don't accept it ( IMO ).


* regarding VAT being inclusive in quoted day rates.

[GreenMirror]

Negotiation is usually excluding VAT. However you should have asked first.

You will pay alot more than 20% VAT.

I would not proceed. If this is how they behave now, imagine how much worse it will get. I suspect you will have issues getting paid too.

Which agency is this?

[Hobosapien]

Commercial transactions are usually quoted excluding VAT and I've never had an agency try it on by saying the rate offered was inc VAT when contracting via my VAT registered Ltd company.

VAT is usually only included if not a commercial transaction, so make sure they're not also putting you inside IR35 as an employee or payrolled temp.

[Lambert Simnel]

...is quoting a rate "VAT included" really a common (if not standard) practice in the UK?

Honestly never heard of nor seen this on any contract in the UK, from working on both the contractor and permie/hiring side of the deal. Someone is taking the mickey.

[Old Greg]

Honestly never heard of nor seen this on any contract in the UK, from working on both the contractor and permie/hiring side of the deal. Someone is taking the mickey.

Newbie wants 100k. Agent tries to pull wool over newbie's eyes and fails.

[jmo21]

Honestly never heard of nor seen this on any contract in the UK, from working on both the contractor and permie/hiring side of the deal. Someone is taking the mickey.

I've seen a few roles advertised recently stating an "all-in" rate, which I think is them trying it on with regards to VAT.