The Flat Rate VAT scheme was introduced by HMRC to simplify VAT returns for small businesses and contractors with their own limited companies.
Under the flat rate vat scheme you pay VAT over to HMRC at a rate specific to your industry, but you still charge VAT at the normal rate (20%). The rate you pay to HMRC is always lower than the current VAT rate.
The result is a 'flat rate VAT profit'. In other words you recive more VAT than you pay. Please see our Contractors Guide to Flat Rate VAT for more information
Ask you employment agency if you can register for Flat Rate VAT if you're unsure.
IR35 is tax legislation introduced by HMRC in April 2000 to discourage the opening of limited companies by contractors for the sole purpose of gaining a tax advantage.
The legislation states that if a director falls inside the IR35 legislation then the Director will need to pay full PAYE and NI tax on all the income taken from the Limited company, in other words such a director can’t pay out any dividends.
The IR35 legislation is a complex piece of employment law legislation. Most recruitment agencies or clients will have an IR35 friendly contract (also known as the “opt out” contract) that a contractor will need to sign when a project or contract is accepted.
It is important that contractors carefully consider the implications of the legislation, as signing an “opt out” contract on its own might not be enough to safeguard you should HMRC challenge you about IR35.
A number of companies offer legal advice, contract reviews and insurance to directors to cover you should you get challenged by HMRC about IR35. There is also a lot of talk that the new government are reviewing this piece of legislation and they are planning to simplify it so that it will be much easier to understand in future.
As a director of a limited company you'll be able to claim valid business expenses.These include (but is not exclusive to):
Your gross pay is the rate you work for. For instance if you get paid £15 per hour, enter 15 and select 'per hour'.
If you're contracting through an agency it might be worth asking them if they will give you an NI uplift if you decide
to contract through a limited company. If this is the case, enter your rate including the NI uplift.
Business expenses will usually fluctuate from week to week, so yust add an estmated average amount.