New to this, forgive me for the questions..

**Ardesco** · 24 May 2007, 21:32

SJD will set up your LTD for you as well (You will be hard pressed to find an accountant who won't do it).

If the contract is with the agency you invoice them directly, the end client has nothing to do with the agreement between you and the agency and will not get involved with you on a financial level.

If you are only using your LTD co as a vehicle for contractor earning register for flat rate vat. You then collect 17.5% VAT and pay the VAT man 13% VAT keeping the rest in your pocket (Or rather your companies pocket, don't mix up your money with company money)

Bill for daily rate + VAT. The agency then claim VAT back from the VAT man.

**Gonzo** · 24 May 2007, 21:36

Originally posted by RockyBalboa

.. but I have read through the forum as much as I can and I believe I am now to be offered my first contract so I was wondering if you guys would help me with this please?

99 % sure I will be offered the contract, so:

1. What is the first step? I assume I request a copy of the contract? Is there anything else I do?

2. I want to set-up as LTD co.. I have read about SJD.. do they also set-up the LTD co for you? Can I arrange for it to be set-up then contact SJD? Do such companies review contracts?

3. I have read about VAT registration and feel I should probably register straight away. Question is, should I register for regular VAT or this 'flat rate' I keep hearing about. What is the difference?

4. The contract is through an agency, however, as I will be operating as a LTD co., I assume that I bill or invoice the client directly? If so, what blurb or boiler-plate text do I put on the invoice to say I am awaiting VAT registration?

5. The daily rate was set by the agency, when I bill or invoice the client, do I bill as a daily rate plus add VAT on? (When I am VAT registered.. but until then, just bill the daily amount.. is that right?).

6. I have read about Cater Allen for a business account.. are there any charges for this? Do I just join them straight away?

Anything else I should know?

Your help and advice are much appreciated.

Thanks.

Since I have had a couple of glasses of wine I am feeling in a good mood.

1. Ask for a copy of their standard contract and get it reviewed for IR35. The contract will be between your company and the agency so it can't be done until your company exists (set up can be done same day though).

2. SJD will set up your company. I think they charge you £150 for doing so (which you can claim back from your co later). Nixon Williams will set up your company (for free people here have said). Other company formation agents are available.

3. If you pick a reputable accountancy firm such as SJD or Nixon Williams I am sure that they will send you the necessary forms for VAT registration which should be done straight away. It is taking a long time to get VAT registered at the moment due to the fact they are putting more checks on this process since HMRC has been taken for a ride on VAT for the tune of several billions over the last few years. Flat rate VAT makes the process easier, your co pays a fixed percentage of gross turnover. VAT "classic" means that you have to work out the VAT invoiced to clients, and subtract any VAT paid out on expenses to work out how much needs to be paid. If your outgoings are low then flat rate makes sense and I would expect your accountant to recommend it.

4. No. Your co invoices the agency and then the agency invoices the client. Your accountant can give you a template or you could try using something like google to find one. I am with SJD and they provide an invoice template which looks astonishingly similar to the invoices that my agency (who do not use SJD) send my client, so I think these things are pretty standard. There are a few legal things that have to be on the invoice, company registered number and address. VAT number.

5. Invoice the agency the daily rate + VAT, once you have a VAT number. Before getting VAT registered invoice with "VAT number applied for" on the invoice and send a separate invoice for the VAT later. The agency wont give a stuff. They are not on the flat rate so they will claim it back when doing their own VAT return.

6. Cater Allen are well geared up for the likes of us and many accountancy firms steer people towards them. Their call centre is a pleasure to deal with but they do have internet banking now. They have a £5000 minimum balance requirement for free banking but this gets waived when referred through some accountants. There is no charge for opening the account but they will want a cheque for £1 from each signatory to the account for AML purposes. Other banks are available.

Good luck but search a bit harder next time.

**RockyBalboa** · 27 May 2007, 17:26

Thanks for that, however, I have a further question.

You mentioned the flat rate scheme. From what I have read, my understanding of this is that you charge 17.5% to the client/agent but then only repay 13% to the HMRC. Is this correct?

If one purchases items for business, can you claim the full 17.5% you paid?

**ASB** · 27 May 2007, 18:25

Originally posted by RockyBalboa

Thanks for that, however, I have a further question.

You mentioned the flat rate scheme. From what I have read, my understanding of this is that you charge 17.5% to the client/agent but then only repay 13% to the HMRC. Is this correct?

If one purchases items for business, can you claim the full 17.5% you paid?

npo thats the trade off. But you can irecliam where the individuual item is > 2k.

**philip@wellwoodhoyle** · 27 May 2007, 19:16

Originally posted by RockyBalboa

.. but I have read through the forum as much as I can and I believe I am now to be offered my first contract so I was wondering if you guys would help me with this please?

99 % sure I will be offered the contract, so:

1. What is the first step? I assume I request a copy of the contract? Is there anything else I do?

2. I want to set-up as LTD co.. I have read about SJD.. do they also set-up the LTD co for you? Can I arrange for it to be set-up then contact SJD? Do such companies review contracts?

3. I have read about VAT registration and feel I should probably register straight away. Question is, should I register for regular VAT or this 'flat rate' I keep hearing about. What is the difference?

4. The contract is through an agency, however, as I will be operating as a LTD co., I assume that I bill or invoice the client directly? If so, what blurb or boiler-plate text do I put on the invoice to say I am awaiting VAT registration?

5. The daily rate was set by the agency, when I bill or invoice the client, do I bill as a daily rate plus add VAT on? (When I am VAT registered.. but until then, just bill the daily amount.. is that right?).

6. I have read about Cater Allen for a business account.. are there any charges for this? Do I just join them straight away?

Anything else I should know?

Your help and advice are much appreciated.

Thanks.

First step is to get the contract reviewed by a specialist firm such as QDOS or Accountax, then you know whether you're caught by IR35 or not. If you are caught, you may save yourself some hassle by just going PAYE with the agency rather than your own limited company. There are still marginal benefits of using a limited company rather than agency PAYE, but if you're not sure about contracting for the long term, or think this contract may be the only one, followed by a return to permiedom, maybe your own ltd is not the way forward. Of course, if your contract is outside IR35, then its your own limited company all the way.

As to the other points, etc., some accountants will do it all for you as part of their standard monthly package fee

effectively giving you free formation advice, tax registrations, etc., and a free company formation thrown in as well. Also, some accountants

have an ever better deal with Cater Allen, where not only is the minimum balance waived, but you also get another 0.25% credit interest on top of their published rates. We actually prefer to be involved right at the beginning to avoid having to put things right afterwards which is why we do it all as part of the standard monthly fee, to save both our clients and ourselves the time and hassle later on. We are not the only firm with this philosophy - you don't have to pay extra for the company formation, nor pay extra for the initial start up advice - just shop around.

**RockyBalboa** · 27 May 2007, 19:21

Originally posted by ASB

npo thats the trade off. But you can irecliam where the individuual item is > 2k.

So you can claim the 17.5% if the cost of whatever you purchase for your business is more than 2000.00 pounds?

For anything below 2000.00 pounds, if it's for business, the business pays for it, but you get no VAT benefits.. i.e. you have to pay the total price INC VAT from the business (just as you would from your own pocket if it were for yourself).

Am I getting this right?

Thanks.

**oraclesmith** · 27 May 2007, 19:27

Originally posted by RockyBalboa

Thanks for that, however, I have a further question.

You mentioned the flat rate scheme. From what I have read, my understanding of this is that you charge 17.5% to the client/agent but then only repay 13% to the HMRC. Is this correct?

Not exactly. As far as I understand, you charge the client your fee + (17.5% of fee). The figure you pay the HMRC is 13% of (your fee+17.5%). So you don't keep the 4.5% but rather less !

The flat rate is 12% for the first year of registration.

**oraclesmith** · 27 May 2007, 19:30

Originally posted by RockyBalboa

So you can claim the 17.5% if the cost of whatever you purchase for your business is more than 2000.00 pounds?

For anything below 2000.00 pounds, if it's for business, the business pays for it, but you get no VAT benefits.. i.e. you have to pay the total price INC VAT from the business (just as you would from your own pocket if it were for yourself).

Am I getting this right?

Thanks.

Yes, that's right - for the flat rate scheme. On the FRS you can't claim any input tax except for one-off major purchases (over £2k)

On registration you can claim pre-registration input tax (ie. VAT you paid on stuff you bought to set up the company and run it until you decided or needed to register for VAT). There are limits to how far you can backdate this, though.

**RockyBalboa** · 27 May 2007, 19:54

Hmm, okay, lets do some figures:

Supposing a fictional daily rate of 100.00 pounds, VAT would be 17.50 pounds, therefore, the client would be billed for 117.50 pounds.

Under the first year of the FRS, that would be: 0.12 of 117.50 which is 14.10 pounds which you would pay to HMRC.

So the net gain to you would be: 117.50 - 14.10 = 103.40; 103.40 - 100.00 =

3.40 pounds per day extra, or, 17.00 pounds per week, or 68.00 pounds per month.

So, basically, the higher the daily rate you are on, the better it is for you to be on the FRS (as long as you don't expect to make many purchases).

BUT:

If you make a 'lot' of business purchases, then the regular VAT scheme may be worthwhile (car expenses do not count if the car is personally owned).

Is this alright?

Thanks.

New to this, forgive me for the questions..