My newbe understanding of VAT

[gabox01]

I see a job post that says 400 GPB/day.
We make a contract, and I charge them 400+VAT.
VAT is 20% so they pay me 480 GPB/day gross.
In my first year, from that 20% i pay back 13.5%, keeping 6.5%.
Let's pretend that i don't care about other taxations, my net daily rate is 426,5 GPB.

Is this correct?

[mudskipper]

I see a job post that says 400 GPB/day.
We make a contract, and I charge them 400+VAT.
VAT is 20% so they pay me 480 GPB/day gross.
In my first year, from that 20% i pay back 13.5%, keeping 6.5%.
Let's pretend that i don't care about other taxations, my net daily rate is 426,5 GPB.

Is this correct?

Nope

You pay back 13.5% of £480

[Brian Potter]

Flat Rate VAT Scheme Guide (FRS)

[gabox01]

Nope

You pay back 13.5% of £480

Ahh, OK.
So the number we are looking for is 415.2.

[Clare@InTouch]

Ahh, OK.
So the number we are looking for is 415.2.

Don't forget that with certain capital assets costing over £2,000 you can claim the VAT back too

[gabox01]

Don't forget that with certain capital assets costing over £2,000 you can claim the VAT back too

How could I forget that one.
Thanks for the hint!

[Pondlife]

Before you start a new thread asking...

http://forums.contractoruk.com/accou...-requests.html

You're welcome.

[speling bee]

I see a job post that says 400 GPB/day.
We make a contract, and I charge them 400+VAT.
VAT is 20% so they pay me 480 GPB/day gross.
In my first year, from that 20% i pay back 13.5%, keeping 6.5%.
Let's pretend that i don't care about other taxations, my net daily rate is 426,5 GPB.

Is this correct?

What is your trade?

Some of us are management consultants, lopping 0.5% off the 13.5%.

[malvolio]

Also worth remembering that VAT is not and never will be your money. The bit you get back from HMRC for using the Flat Rate scheme is your reward for saving them some paper work (it helps if you think about who it was meant to help; people like small shops and pubs that have multiple line items with multiple VAT treatments. It's not actually about giving us money for free).

It's also worth remembering that the bit you get back from the FRS is earned income so is liable to CT, so you only get to keep 80% of your 6.5%.

[TheCyclingProgrammer]

Also worth remembering that VAT is not and never will be your money. The bit you get back from HMRC for using the Flat Rate scheme is your reward for saving them some paper work (it helps if you think about who it was meant to help; people like small shops and pubs that have multiple line items with multiple VAT treatments. It's not actually about giving us money for free).

It's also worth remembering that the bit you get back from the FRS is earned income so is liable to CT, so you only get to keep 80% of your 6.5%.

Also worth remembering that the flat rate surplus is intended to cover your input VAT that you can't reclaim, so your true gross profit from the FRS is FRS surplus less all unreclaimed input VAT, which is then, as you say, taxed as normal profit.

If your input VAT over the course of a year exceeds your FRS surplus you should consider coming off the FRS. Realistically most contractors should find the scheme profitable, but keep an eye on your expenses.