Flat Rate VAT schemes Flat Rate VAT schemes
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  1. #1

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    Default Flat Rate VAT schemes

    I am newly back in the UK after 12 years away (living in the sun until my Visa ran out!)

    I've been talking with an agency and they are suggesting I go down the Flat Rate VAT scheme, it seems they have a lot of companies which work in this way. I won't have many inputs so I would be on the IT contractors standard rate.

    I don't yet have my own ltd company setup - but that part seems quick and easy to organise via companies house.

    An option is for me to be under PAYE but working for one of their existing companies that is under the FRV - looking at the HMRC website seems that companies can't be associated with other ones if they are to be eligible for FRV?

    Is this area a well known avoidance scheme? If so can you share links and posts so I can review it further?

    I am not too concerned about IR35 issues as my area is SEO and I don't intend to be working for any single company for more than a few weeks. Once I am established in the UK I want to pick up my own clients directly and break away from agencies etc.

    Any advice appreciated.

    Mark

  2. #2

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    Dunno about the association bit for FRV but the scheme was put in place to reduce the admin overhead for small companies.

    As a company with limited input VAT, you will be on a slightly penalising rate. Do some sums based on your expected VAT-able outgoings (accountant, mobile phone, broadband, etc) and compare what you could knock off your VAT bill vs what you'd get if you used the flat rate. You may find the extra 5 mins a month admin pays for itself.

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    One never knows when one might want an expensive new laptop after all... and those extra 5 minutes could be beneficial if that were the case.

    I'm not sure that I'd go FRS these days as the "benefit" of the reduced paperwork is mostly negated by things like FreeAgent et al. But other opinions are available.
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  4. #4

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    FRV is not a "scheme" in the context of this subforum.

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    Quote Originally Posted by DealorNoDeal View Post
    FRV is not a "scheme" in the context of this subforum.
    +1

    And FRV gains about 0.1% of input amount? I think there were changes around 2017?

    After 1st year discount runs out(1%) its not worth it.
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  6. #6

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    Moved to Accounting
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  7. #7

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    1) Why would you take advice on accounts from an agency?
    2) Get an accountant. There's a thread on the forum all about this.
    3) FRS for the first year only (there's a 1% discount) and only if you don't have large amounts of VAT expenses (hotels, miles, meals out etc. NOTE that trains and planes dont attract VAT). After the first year you want to be on standard VAT.
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  8. #8

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    Default Scheme

    Quote Originally Posted by DealorNoDeal View Post
    FRV is not a "scheme" in the context of this subforum.
    Thanks re-reading my post I realise I wasn't explaining myself.

    The agency I spoke with explained that they themselves run very many Flat Rate scheme companies and if I needed an umbrella type of employer I could be paid via PAYE through one of theirs - when I read the HMRC site it seems to say that FRV companies can't be connected, so it sounded like some form of scheme? Maybe I just misunderstood what the guy was saying.

    I got the impression that they used FRV companies to reduce their own VAT whilst dividing up their employees among multiple smaller entities?

    Do you see what I mean? That sounded like an artificial setup of some form or other. Not sure that agency is the best place, but it was the first one I spoke to which had a suitable role for me.

  9. #9

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    I’m familiar with the scheme OP is referring to and it was one of the motivations for HMRC introducing the limited cost trader rule. Agencies would setup multiple Ltd companies for their recruits and register for flat rate VAT in order to pocket the flat rate surplus. Not illegal per se but clearly an abuse of the system and I wouldn’t touch any agency who is still doing this with a barge pole.

    Recruitment advisers' tax scheme liquidated after HMRC asks questions | Business | The Guardian
    Last edited by TheCyclingProgrammer; 20th December 2019 at 23:04.

  10. #10

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    Default hmm

    Thanks for finding that article out..That does seem to match. Strange that article is two years old and yet there are seemingly outfits still going about things in the same way, without action by HMRC (or probably there is).

    As you say I don't think that Agency is reliable so I will not spend to much time in discussion with them as there is a clear risk they will shut down at short notice.

    I read that article and it links to a few similar ones

    How can you tell if a temp agency is using a tax avoidance scheme? | Politics | The Guardian which explains the warning signs to look for.
    Last edited by technobabble; 21st December 2019 at 06:05.

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