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**boredsenseless** · 16 November 2006, 08:28

Originally posted by UberNube

HiHi

I'm currently in the world of permiedom but have just been offered a contract at a previous employer starting in a few weeks

This will be working directly for them so I presume I will avoid IR35 messiness.

They have asked me to draft a contract, which looking at previous posts I should be able to get off the PCG when I join, which I will do today.

I haven't set anything up yet - Company etc. Was going to get one of the recommended accounts on here to form company etc. Then join PCG

My question relates to VAT

They have agreed to a daily rate of £400 on a guaranteed 9 months with probable extension. I am unsure wether to put VAT on top of this. They employ a few contractors already but via agencies so presumably used to this

Do I add Vat to this from the beginning ?

What is the implication if they think this rate includes vat.

AM I better off not charging vat in this case until I hit the threshold and effectively then take a 60 a day paycut

Or am I better thinking that I will be actually on £340 a day

Sorry for the obvious shortcomings in my knowledge. I am on a short timeframe to get everything up and running and would normally have done some heavy research.

Btw I have just downloaded the guides on here and PCG so will look through them

Thanks in advance

In your contract make sure you state the rate is exclusive of VAT, unless they are a really small company they will be used to quoting money minus VAT, since they just claim it back from someone somewhere in the food chain.

Be careful just because you go direct doesn't mean you avoid IR35, in fact as you are going to an old employer you may just make yourself even more IR35 than before. Having said this so long as you can influence working conditions and contract clauses you'll be okay, get your contract reviewed though.

IR35 is about working practices not agents sitting in the middle, as has been said before if you just turn up on site each day, wait to be given a task that someone else manages and then you get given more work from a 'pile' based on a first to finish the last piece basis then you are almost definetly a disguised employee, your contract may protect you but only until HMRC start digging.

The only sure fire way to avoid it (and I know Malvolio will say its a voluntary tax) is to work on fixed price contracts with given deliverables, and an element of financial risk and reward on your behalf unrelated to how many hours you work.

**UberNube** · 16 November 2006, 08:35

Thanks for the quick reply.

I presume the draft contracts I can get off PCG will be IR35 compliant?

The HR dept have asked me to draft the contract so I can obviously tailor accordingly.

Sorry for the gap in any knowledge - Never considered contracting before two days ago, and so no prior knowledge of IR35 etc.

Thanks for the bit on VAT . WIll put in contract rate ex vat -

Just worried in case they turn around and say it should include how best to treat it. I suppose that would be for the accountant to say after I engage one

**Lucifer Box** · 16 November 2006, 08:38

You don't have to register for VAT until your turnover is about £55k I think it is this year. Once you hit that you must register. Until you have, you must not add VAT to your invoices, thereafter you must do so.

Normally you should register if you think your annual turnover will be greater than that. It's generally in your interests to do so as it makes you look more professional - most companies expect to be charged VAT by their supplier.

Rates and virtually everything else in business land are quoted ex-VAT, so if you register for VAT you charge VAT on top of everything on your invoice to the client, even if you paid VAT on it yourself.

While you are in the process of registering you should add "VAT registration applied for to your invoices" (don't add VAT though) and then send the client an invoice for the VAT due when you get your VAT number.

Your accountant should help you with all of this so in the meantime get one of the board's recommended accountants and get them on the case. If you are a typical contractor the flat rate VAT scheme will probably be attractive. Take your accountant's advise based on your business model.

Check out the VAT portion of the HMRC website and get yourself a copy of the VAT100 book. Both it and them are surprisingly good. The VAT helpline is also very good and completely unlike the IR helpline in that it is staffed by people who actually know how the system works. They also run regular workshops and courses (free) for first timers all over the country.

Good luck and keep us posted.

**tim123** · 16 November 2006, 11:10

Originally posted by Lucifer Box

You don't have to register for VAT until your turnover is about £55k I think it is this year. Once you hit that you must register.

No! You must register in the quarter in which your turnover reaches a figure which is slightly more than a quarter of the annual amount. (There are exceptions for a company that runs an obviously seasonable business)

Waiting until you reach the annual amount, will get you fined.

But that is really irrelevent. Someone with an expected turnover of 100K, should insist on a voluntary registration. HMRC have tightened up on this but a signed contract for 9 months work should be enough proof for them to let you do it.

Note that after having applied, whilst waiting for the registration to be confirmed, you should invoice your clients on a 'waiting AT registration' basis, without the VAT in the original invoice and invoice them for the back-dated VAT later. This is a 'normal' process and most clients should be able to cope with it.

tim

**UberNube** · 17 November 2006, 11:38

Thanks for the advice

In the last 24 hrs I have :

Created the company
Joined the PCG
Engaged the services of an Accountant ( Darren @ 1staccountancy )

Just frantically getting information now.

Many thanks for your help

**BillHicksRIP** · 18 November 2006, 17:42

The VAT people may want some proof of intention to trade. A copy of the contract is one, but also get your accountant to knock up an invoice for 12 months fees and send that in along with your VAT application. Will shave off a couple of weeks in turnaround which was 7 weeks for me from application to getting the VAT number in my case.

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