I am moving to a self employed role where I will be invoicing only American companies and I wanted to know if I need to register for VAT as I cannot invoice them with VAT as it is not an applicable tax in the US. My invoicing will exceed 150k over the year if that helps.
Also on the subject of insurances it will only be myself and my wife working as joint sole traders and no other employees, what insurances would we need?
Thanks
I would.
You have company expenses which could get VAT back (Flat rate - purchases over £2,000)
Even if you exceed the threshold for going to full-rate VAT - a letter of explanation (that VAT is not applicable to your income) will sort out.
Flat rate vat return completion isn't time consuming or dificult.
Al
Al,
You mention purchases over two thousand, is that the only basis I can claim VAT back? For example if I want to buy a new laptop it would cost me say 1k, would I not be able to claim the VAT back on that? I will also lease a car, could I claim back the VAT on that as well?
Thanks
Mark
Originally Posted by blackal
As Al says the scheme is pretty simple and easy from an admin perspective. All you need to know here:
https://www.gov.uk/vat-flat-rate-scheme/overview
I'm pretty sure that you have to be VAT registered if your turnover exceeds the threshold.
You've no reason not to because you'll be able to claim VAT back on all your business expenses without having to collect any VAT on your overseas sales.
Your insurance question will depend on what kind of work you'll be doing. I would suspect you'll need at least cover for public liability and professional indemnity.
I had a similar level of turn over when I worked for a US company and was advised to come off the flat rate scheme to enable me to reclaim VAT on my uk expenses.
Regarding insurance, you'll probably need professional indemnity insurance. Make sure any insurance does cover you for working with a US company.
I will essentially on site occasionally on behalf of the company and other than that working from home. So Indemnity makes sense but not sure I need public liability as the work is office related so meetings rather than anything else.
Thanks
QUOTE=alanm_3;4111159]Your insurance question will depend on what kind of work you'll be doing. I would suspect you'll need at least cover for public liability and professional indemnity.[/QUOTE]
So essentially you mean just register for normal VAT rather than flat rate then I can claim all VAT back?
Thanks
In my experience, insurance premiums don't cost that much, but vary based on industry and profession. Are you something like a Civil Engineer? Public liability, employer's liability and professional indemnity are common. The policies needed and minimum levels of cover are normally defined by the clients and in the services contract for your engagement and proof is required by providing copies of the certificates.
VAT seems a nightmare, but is pretty easy these days once you are set up. An on-line quarterly return. even if £0.
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Yes, you can go on the flat rate scheme later if appropriate, my accountant advised me to come off the scheme as it allowed me to claim the VAT back on the UK hotels, equipment etc. I had been VAT registered for several years before and operated the flat rate scheme for a couple of years. Its actually very good if your contract is UK based.
If you haven't done so already speak to an accountant - I use these guys http://www.accountsnet.co.uk and it may be worth contacting them for a bit of expert advice.
You need public liability for any of the office workers who might be injured by you at work - if you cause the accident, you pay for it.
You will need an account to organise your VAT returns - it looks like you will be over the threshold.
You can also consider becoming a limited company, especially if the employers are big corporations (if you don't, you take the risk of losing your house if you end up with a large claim beyond your insurance limits for Public and Professional Liability.
Go for flat rate, and try to get as good a "classification" as you can.
I charge 20% vat on all invoices, and pay 14.5% on the "total invoice" - this means I make a few hundred ££ on each month's VAT (FLAT RATE REGISTERED) You get a small reward for the simplification, and also because you aren't claiming VAT refund on small purchases.
The VAT claim on purchased goods (you mention laptop) - you can add other things to that purchase but they must be on the same Order, to the same supplier. I either buy laptop when I am also getting other items (Monitor etc) - or last time, I spec'd the laptop up over £2,000 (inc 3yr warranty) to bring the effective cost down to £1,600.
I went above the Flat rate/full rate threshold one year, but because most invoices were to an American company - I didn't benefit, so avoided jumping to full vat registered
HTH
Al
I do not follow this? I am invoicing a single US company and therefore will not invoice any VAT at all, why would a flat rate scheme apply?
QUOTE=blackal;4111246]Go for flat rate, and try to get as good a "classification" as you can.
I charge 20% vat on all invoices, and pay 14.5% on the "total invoice" - this means I make a few hundred ££ on each month's VAT (FLAT RATE REGISTERED) You get a small reward for the simplification, and also because you aren't claiming VAT refund on small purchases.
The VAT claim on purchased goods (you mention laptop) - you can add other things to that purchase but they must be on the same Order, to the same supplier. I either buy laptop when I am also getting other items (Monitor etc) - or last time, I spec'd the laptop up over £2,000 (inc 3yr warranty) to bring the effective cost down to £1,600.
I went above the Flat rate/full rate threshold one year, but because most invoices were to an American company - I didn't benefit, so avoided jumping to full vat registered
HTH
Al[/QUOTE]
Maybe there is a kick-back for UK purchases.
You will be buying plane tickets, IT, and general consumables in the UK.
I don't understand VAT either.
Speak to an accountant, or get professional advice.
There are many different ways to skin a cat - find out which way applies to your proposed method of working abroad.
It wouldn't. You need to register to reclaim the VAT you pay.
Wrt insurance, public liability is an absolute must, then professional liability. Other insurances are an option based on your requirements.
I always thought you could only claim back VAT on purchase against VAT collected via invoices?
I must admit it was a long time ago and I never invoiced overseas clients, so there may be a difference here, but...
M.
No, certain businesses get a VAT refund every quarter.
OP - do not go on the flat rate. Register on the standard VAT scheme, and as you rightly assumed you can claim back all VAT on expenditure but you won't owe any VAT as you'll be issuing invoices at zero rate. You will then be due a VAT refund every quarter.
Examples of businesses like this are nursing homes - they do not charge VAT on their services (even though they are in the UK, they are exempt) but reclaim all the VAT on their supplies. This might have changed very recently, but other examples exist - farmers springs to mind.
[/QUOTE]
Sorry - I dont invoice non EU companies for VAT. only EU.
I still say it is beneficial to be Flat-rate registered, and only go full-VAT if you absolutely have to (by way of vat-able revenue threshold).
Flat-rate vat is a piece of piss, and has advantages
Al
OP; it's crucial you get an accountant before you go much further as, with respect, it's clear you aren't across even the basic requirements for tax & VAT. If you are invoicing over £150k per annum then you need competent advice to assess carefully if the two of you would benefit from operating as a limited company or a partnership rather than as sole traders. While the tax regime has changed in the last few years you could still be liable for substantial tax bills as sole traders, especially if all you are selling is your time.
Have a look at the ContractorUK forum as you may well find good advice there (about how to operate, insurance & accountancy):
http://www.contractoruk.com/
I used to recommend the PCG (now IPSE) as well but I haven't bothered with them much since they now seem more focused on selling services to contractors. However, there is some useful information on the site
https://www.ipse.co.uk/
These two brokers sell insurance to contractors & are worth a look:
https://www.caunceohara.co.uk/
https://www.coulsonpritchardonline.co.uk/
There are others as well but those are the two I know.
You don't need an accountant to handle day-to day record keeping or VAT but you do need professional guidance on how to set up the business most efficiently & the legal requirements you will encounter.
Please learn to quote properly as well as currently reading your posts is difficult.
I work in Europe live in U.K., every invoice is zero vat as to a German company to start I was in a flat rate vat and then my accountant said go full vat. Now he says I am in what accountants call vat heaven I never pay vat but I claim it back on all UK company related purchases, airport parking, U.K. Hotel if needed, stationary.
Flat rate VAT might save you making returns but it would definitely make me worse off. I can't imagine a situation where it's beneficial.
Eddie
Whole chunks of my life come under the heading "it seemed like a good idea at the time".
For example?
Accounting simplicity. It's just another way of calculating the difference between input and output. It's 14% for management consultants. It's accurate to actuals within tolerance. It's not really designed to deliver a financial advantage but perhaps can be nudged to yield a few hundred quid extra, but who cares. It's just dead simple, not having to fiddle about with tiny amounts of VAT on all the flip charts, marker pens, brown paper rolls and post it notes that consultants buy.
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If you provide services and have minimal expenses then flat rate makes life a lot easier so it suits a lot of contractors.
If you're just selling your time & don't purchase & resell materials then it's often financially advantageous. To what extent depends on the trade sector your business falls into. For example:
You bill a client for £10,000, adding VAT at 20% to make £12,000 in total income for the month
You’re an IT consultant, so the VAT flat rate for your business is 14.5%
Your flat rate payment will be 14.5% of £12,000, or £1740
Instant profit of £260. If you do that every month that's £780 per quarter or £3120 per year. Half a Rolex for free.
A thread resurrection, but it does mention flat rate VAT schemes. Many self-employed, office based, service providers have very low purchasing costs and don't try to claim the new double-glazing as an essential business purchase. You might be on a 14% flat rate VAT scheme.
From 1st April, are you switching to 16.5% following HMRC changes?
Thanks for any advice.
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Im leaving flat rate scheme as I'd end up losing money. Shame as it means more paperwork.
I am Vat registered and in Construction,now if I only work on new houses (vat exempt ) in one quarter,then there will be no vat to collect, so all the vat I reclaim materials, fuel and all General running expenses HMRC pay me back by the 7th of the following month
I'm sticking with flat rate as I provide services only and have no supplies, materials or other VATable purchases. It might only be a few quid, but under standard I'd get pretty much zero.
Same here, but given the VAT charged by my accountant and the odd spot of accommodation and car parking I'll be moving off the flat rate scheme ... I'll be ahead by only a few quid, but better a few quid in my pocket than the tax man's.
Plus being able to claim the VAT back on IT purchases might make me more inclined to upgrade my ageing PC and laptop.
Are you aware that the rules are changing & that traders who don't buy materials & just supply their own labour are being put on a common Flat Rate (16.5%)? You no longer get to decide which business category you fit into.
Monthly invoice for fees: £5000
VAT @ 20%: £1000
Total invoice: £6000
16.5% of £6000: £990 (VAT due to HMRC)
"Profit": £10
Apart from the ease of record keeping I'd be surprised if you couldn't claim back more than £10 a month just in VAT on petrol, train fares, stationery etc.
Absolutely. There's no money in it any more, but I wouldn't make much money at all if going standard. I don't travel, I have no expenditure - the only thing I could claim is my accountancy fees. As my numbers are a bit different to your illustration and I have a reasonable accountancy package, they're within a few quid of each other.
If I was on the train or up and down the motorway each day, stopping away from home etc then the answer would of course be different, but for the moment it's okay as is for me.
edit: I should caveat the above with:
a) There's a good chance I'm wrong
b) Chasing the last penny doesn't interest me. I'm a closet hippy in a capitalist suit. I say suit, tracky bottoms/combats/jeans 99% of working time.
Last edited by kungfugerbil; 24th March 2017 at 16:57.
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