VAT registration newbie questions

[Franklin09]

This is my first year contracting (started in December 2018), via Limited company, so far no VAT needed. In the next couple of months, I will need to register for VAT as my company's taxable income is going to go over £85,000.

I work as a software developer.

Income:
- daily rate £450, £9,000 per month, £100,000 per year

My expenses:
- mileage: £180 / month
- train: £550 / month

That's it. Very simple from the accounting perspective and that's the reason why I run the accounts myself. So far so good but I am trying to wrap my head around the VAT related stuff.

Assuming the situation will be as described above for another year or so, which VAT scheme would make more sense, standard or flat rate? (I get some mixed messages reading this and other forums). Would you be able to use the above numbers to show an example VAT return?

[Scruff]

It's not your Company's taxable income that matters, but it's Turnover.

If you aren't familiar with the difference, I'd suggest engaging an Accountant?

[northernladuk]

You haven't even reached a year end and you are tipping up already.

Get yourself an accountant, at least for the first year. Once you've been through a full cycle then you can go it alone.

[Lance]

If you don’t bother with an accountant then flat rate at least for the first year.
With an accountant, it depends on the cost of the accountant as to whether you go flat or standard.
Second year standard.
Probably.

Get an accountant.

[CryingSheep]

With the amount of expenses you mention you should definitely go flat rate (you have 1% discount in your fist year).

For 100k income you would charge 20k vat (100 X 20%) and you would have to pay back only 17.4k (120 X 14.5%) or 16.2k (120 X 13.5%) with the 1% discount in the first year. This will represent an 'extra income' of 2.6k or 3.8k if you register for VAT...

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[Franklin09]

With the amount of expenses you mention you should definitely go flat rate (you have 1% discount in your fist year).

For 100k income you would charge 20k vat (100 X 20%) and you would have to pay back only 17.4k (120 X 14.5%) or 16.2k (120 X 13.5%) with the 1% discount in the first year. This will represent an 'extra income' of 2.6k or 3.8k if you register for VAT...

Sent from my ONEPLUS A6000 using Contractor UK Forum mobile app

I would be classified as a limited cost business and flat rate percentage will be 16.5% (not 14.5% / 13.5% as per your examples). Correct me if I am wrong please.

[CryingSheep]

I would be classified as a limited cost business and flat rate percentage will be 16.5% (not 14.5% / 13.5% as per your examples). Correct me if I am wrong please.

If you are an IT consultant (I would expect a software developer would be considered one) the rates are the ones from my example...

Sent from my ONEPLUS A6000 using Contractor UK Forum mobile app

[CryingSheep]

Computer and IT consultancy or data processing – 14.5%

I'm pretty sure a software developer will be in that classification

If you are doing your own books, get free agent is a great help and there is ways to get it for free...

[Franklin09]

If you don’t bother with an accountant then flat rate at least for the first year.
With an accountant, it depends on the cost of the accountant as to whether you go flat or standard.
Second year standard.
Probably.

Get an accountant.

You see, for the past 9 months (started contracting in December 2018) I have been happily using FreeAgent for all my accounting matters (invoices, expenses, dividends, salary, etc...). All well and good and extremely simple. Now, it is the time to register for VAT as I will be going over £85,000 around October (if during the course of any 12 months, your ‘taxable supplies’ exceed the VAT registration threshold, you are legally obliged to register for VAT). I am pretty sure I can handle VAT returns too.

I appreciate that it all depends and different people/companies have different situations/needs/other factors, etc... but my case is dead simple: steady contract with ~£9,000 invoiced every month (£450/day) with expenses: train (~£550/month) and car mileage (~£180/month). That's it. There is no other factor/twist to it.

I have had a couple of bad experiences with two different accountants who effectively tried to give me a piece of bad advice (one related to dividends, one related to company share splitting between me and my wife). I might be getting an accountant in the end but I still would like to get a good understanding of how different VAT scheme work and which one would be more appropriate for my case.

Much appreciate all your comments and help.

[northernladuk]

With the amount of expenses you mention you should definitely go flat rate (you have 1% discount in your fist year).

For 100k income you would charge 20k vat (100 X 20%) and you would have to pay back only 17.4k (120 X 14.5%) or 16.2k (120 X 13.5%) with the 1% discount in the first year. This will represent an 'extra income' of 2.6k or 3.8k if you register for VAT...

Are you really sure about this? Have you taken in to account the changes in April 2017 where most of us have become a limited cost trader and will be charged 16.5%?

Computer and IT consultancy or data processing – 14.5%

I'm pretty sure a software developer will be in that classification

Clearly not. Even the OP has corrected you.

Really crap advice as usual.

OP. CryingSheep has shown you how bad it is to get advice from a bunch of contractors when you are trying to do your own books. Further evidence that an accountant for the first year who you can bleed dry of information is a much better bet.