A few questions about starting up ?

[psychocandy]

Spoke to one of the contractor accountancy firms recently and they said a few things I didnt quite understand :-

1. If you live in the north of the country theres a special scheme where you pay no employers NI for 12 months?

2. Even though you charge VAT on your invoices you dont have to pay all the VAT to the HMRC (flat rate or something)?

Any ideas?

[psychocandy]

Spoke to one of the contractor accountancy firms recently and they said a few things I didnt quite understand :-

1. If you live in the north of the country theres a special scheme where you pay no employers NI for 12 months?

2. Even though you charge VAT on your invoices you dont have to pay all the VAT to the HMRC (flat rate or something)?

Any ideas?

Ah. (1) is Regional employer NIC holiday.
(2) is flat rate VAT scheme

With the flat rate VAT scheme my understanding is that you get to charge the agency VAT at 20% but then only pay back 14.5% (13.5 in first year) of your turnover (i.e. your contract income).

I appreciate you then cant claim back VAT on purchases but surely this is a good deal?

For instance, £80,000 Contract income, Add 20 % VAT of £16,000 = Total £96,000
Pay back 14.5% flat rate on £96,000? = £13920. Profit of £2180.

Means you'd have spend over £10,000 for which you cant claim VAT back to lose out. Is this right?

Although, is there any VAT reclaimed element when you claim 40p/mile travelling expenses?

[DaveB]

Ah. (1) is Regional employer NIC holiday.
(2) is flat rate VAT scheme

With the flat rate VAT scheme my understanding is that you get to charge the agency VAT at 20% but then only pay back 14.5% (13.5 in first year) of your turnover (i.e. your contract income).

I appreciate you then cant claim back VAT on purchases but surely this is a good deal?

For instance, £80,000 Contract income, Add 20 % VAT of £16,000 = Total £96,000
Pay back 14.5% flat rate on £96,000? = £13920. Profit of £2180.

Means you'd have spend over £10,000 for which you cant claim VAT back to lose out. Is this right?

Although, is there any VAT reclaimed element when you claim 40p/mile travelling expenses?

You can still claim for capital purchases over £2000 in one purchase.

[psychocandy]

You can still claim for capital purchases over £2000 in one purchase.

Hmm. Not sure what I'd spend £2000 on. A PC maybe?

[Fred Bloggs]

Ah. (1) is Regional employer NIC holiday.
(2) is flat rate VAT scheme

With the flat rate VAT scheme my understanding is that you get to charge the agency VAT at 20% but then only pay back 14.5% (13.5 in first year) of your turnover (i.e. your contract income).

I appreciate you then cant claim back VAT on purchases but surely this is a good deal?

For instance, £80,000 Contract income, Add 20 % VAT of £16,000 = Total £96,000
Pay back 14.5% flat rate on £96,000? = £13920. Profit of £2180.

Means you'd have spend over £10,000 for which you cant claim VAT back to lose out. Is this right?

Although, is there any VAT reclaimed element when you claim 40p/mile travelling expenses?

Don't forget you pay corporation tax on the £2180 though.

[DaveB]

Hmm. Not sure what I'd spend £2000 on. A PC maybe?

HMRC guidance indicates it can be for any single purchase over £2000. So it could be multiple items on the same invoice.