Subcontracting and flat rate scheme

[mudskipper]

How does subcontracting/ROS work on the VAT flat rate scheme? (I will of course ask my accountant if it becomes a reality!) Has anyone done this?

I find contractor B to do the work and agree a rate , MyCo carries on invoicing client, and contractor B invoices MyCo. All sounds quite simple, but if Contractor B is VAT registered, does that mean that MyCo has to cover that VAT cost? Makes a big difference to the rate I could agree with them.

[thunderlizard]

Yes that's correct. You'd probably want to move back to normal VAT.

[THEPUMA]

Or get contractor B to invoice client co and you invoice contractor B for your commission share but may not be commercially viable.

Or contractor B invoices client co for their share of the rate and you invoice client co for your commission (even less likely to be commercially viable).

[mudskipper]

Thanks - will give it some thought!

[DrEvil]

I've started doing this with two subbies this year. You'll need to come off FRS as you'll (probably) be paying too much in VAT because they'll bill you + VAT.

You just need to make sure that as a minimum you'll be covering your lost FRS money from the subbies.

Can help with IR35 too I guess. I make sure that the client treats my company as a provider of multiple resources and I get a statement of work etc beforehand. I also only sub-contract to people I can know/trust as I cant be bothered with the hassle of recruiting should one break contract.