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Dear Forum: Charging VAT for Services

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Late to thread but ...... Could be to do with FRV, have you heard of this ?

 

Not sure if the rules have changed on it, but it is/was offered to make VAT accounting easy for small businesses.

 

You charge 20% to client you pay 15% to HMRC

 

The 5% difference was to allow for your purchase of tools, equipment, premises or any other expense

 

A consultant could in theory only need their knowledge and expertise, a laptop, maybe some trade body subs, insurance or whatever so let's say that eats 2% of the benefit

 

On 60k revenue, that's an extra £1800 freed up, so if they're a director of their own ltd. company that could equate to £1350 in pocket that year !

 

Not bad going for some inherently easy accounting !

 

What you have written doesn't seem to match the guidance. It might be the way you have phrased or I have misunderstood what you have written. Here is the link:

 

https://www.gov.uk/vat-flat-rate-scheme

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You're right, badly phrased details not correct, was just trying to illustrate how I thought said "consultant" might be looking to achieve increase in real world income.

 

Looked into this in 2014 at suggestion of a friend, he gave me examples of how it worked in his industry. No good for me, but still seems credible... If you found yourself in an advantageous position within your deemed category ?

 

Suppose other reasons for VAT reg could be insistence of a client / middleman maybe with the option of using their "umbrella scheme" instead of going through the paperwork. Had that one pulled on me a few times, but that's another story....

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Late to thread but ...... Could be to do with FRV, have you heard of this ?

 

Not sure if the rules have changed on it, but it is/was offered to make VAT accounting easy for small businesses.

 

You charge 20% to client you pay 15% to HMRC

 

The 5% difference was to allow for your purchase of tools, equipment, premises or any other expense

 

A consultant could in theory only need their knowledge and expertise, a laptop, maybe some trade body subs, insurance or whatever so let's say that eats 2% of the benefit

 

On 60k revenue, that's an extra £1800 freed up, so if they're a director of their own ltd. company that could equate to £1350 in pocket that year !

 

Not bad going for some inherently easy accounting !

 

But if you are living away during the week you will be in hotels - that's VAT on the hotel you cannot recover. You cannot recover it on books (which are VAT-ed if electronic or if they have software), nor on subsistence etc...

 

The flat rate scheme used to be good but it's less valuable than before..

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And that's why it was no use to me, I book my own hotels and have a serious gadget / tool habit !

 

If I was a skinflint, and only worked in Yorkshire though.....

 

I'll give you the example.... Security firm, lads all held their own licence, used own vehicles, radios belonged to clients. No need for premises. Turnover just below limits.

 

All it left was uniforms bookkeeping and some small incidentals.

 

This was in 13/14 though, maybe that was back under old more generous rules ?

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But if you are living away during the week you will be in hotels - that's VAT on the hotel you cannot recover. You cannot recover it on books (which are VAT-ed if electronic or if they have software), nor on subsistence etc...

 

The flat rate scheme used to be good but it's less valuable than before..

 

It's very much less valuable since they adjusted the rates.

In IT at least there is absolutely no advantage to gain anymore.

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did he do the job you wanted for the price quoted and was the work acceptable? do you think the deal was reasonable or better?

then why should you worry about his financial dealings they are after all none of your business.

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You seem to misunderstand something unless you are being deliberately obtuse. Your post talks about a plasterer working for you.....the plasterer would have to work just for you and not be allowed to work elsewhere if they choose to be classed as an employee, hence me saying you are not comparing like with like, its not a good example to use. You seem to be missing the point stated in the guidance.

 

If you are not allowed to work for anyone else during that time, depending on the other criteria, as detailed in the guidance, you could be classed as an employee. I don't know your full T&Cs of your contract. There are several such cases been highlighted in the news recently where people have had to set up as self employed when they should be employed.

 

Slightly late response to this, but in case anyone else is confused by it, you've got it wrong.

The test for employment involves very much more than just exclusivity.

I routinely work exclusively for a single client, as would a plasterer, not by contractual enforcement, but just by the nature of taking on a contract to work a professional day, 5 days a week. This on it's own is definitely not enough to make you 'employed'.

The cases you refer to, mostly the BBC, have many more factors involved, some of the key ones being no right to supply an alternative person to do the work, lack of control over how they work, in the case of the BBC they were also issues with corporate control over holidays and such like, in effect they were treat like employees, and that is what makes someone an employee.

 

Anyway, what lobster said was completely wrong. Having a single client most definitely doesn't make you employed.

 

And what the OP had assumed was wrong as well, if the business was registered for VAT as described then HMRC very much would be expecting to be paid the VAT and not paying it would be VAT fraud, which they're quite keen on prosecuting. Highly unlikely that he could get away with it, since the business would have to file annual accounts.

Edited by Cyclone

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One reason for voluntary VAT registration: in order to recover VAT paid out ('Input Tax').

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