mac12:
Follow this advice then fill in a form P87 to claim your costs back from the tax man.
Problem is I currently get paid £140 per shift with umbrella, if I go PAYE that reduces to £128 per shift so even with form P87 I’m going to be quite a bit worse off.
No you’re not. If you’re on PAYE you’re actually on £141 per shift. Why? Because with the umbrella company you don’t get paid holidays as its included in your shift rate and on PAYE you do. Paid holidays are worth another 10.7%. So £128+10.7%=£141. When you’re sat at home taking a week off on umbrella you don’t get paid. When you’re sat at home on PAYE you get paid. This was illustrated to a friend of mine at Xmas when he was sat at home for Xmas week on £0 and I got £600.
So from a gross pay per shift amount you’re actually no worse off on PAYE. In fact when you deduct the umbrella company fee from the £140 shift then you’re better off on PAYE.
I would point out though that if they’re paying £128 a shift on PAYE and £140 for self employed/umbrella then they’re actually paying you more fairly than those who only pay an extra £1/hr.
Different strokes for different folks… I work under Ltd Co, and employ myself - have been PAYE & Self Employed, but find Ltd Co suits me best and I pay very little tax, in fact I just got a tax refund for 2013/14 assessment.
Wilk:
I have got a question regarding to paying taxes.
Let’s say you are invoicing the agency for the amount of £1000 (excluding VAT). Then you are charging VAT (20%) and it is £1200 on the invoice now.
What is happening to £200?
Is that like you leave £100 for possible Corporation Tax bill and £100 for Vatman?
I have been told that we have got some discount from HMRC which is 9% for Vatman and 1% for you over first year since the registration.
So it seems what I do with £200 is:
£100 CT bill, £90 for Vatman, £10 for your pocket.
Does not it work in this way?
The £200 VAT is treated as a separate entity and accounted for separately in VAT accounts. Your main accounts that your corporate tax is calculated on are ex-VAT. THIS IS IMPORTANT TO REMEMBER IF YOU ARE VAT REGISTERED - your accounts for tax calculation are all ex-VAT. It means that when you claim expenses they have to be excluding VAT if the goods/services you’re buying are VATable. So if you buy a pair of gloves which are £12 inc VAT, you have to remove the VAT and can only claim £10 in your accounts. To claim the full £12 as an expense is tax fraud. The other £2 is covered by your VAT accounts.
How it works on flat VAT is you still account for your VAT in the normal way in a separate entry or accounts just for the VAT. You pay the VAT man whatever the percentage of the flat VAT rate is for the business for the total you’ve charged instead of how you’d do it normally which is to take off what you’ve spent from what you charged and pay the difference or get a refund if its a negative figure.
An example:
Bob has a business and charges £10,000 of VATable work (£2000 VAT) over the year. He has £200 he’s paid out in VAT on his expenses.
Flat VAT rate scheme - assume 10%: Bob calculates the flat VAT as being 10% of what he has charged out ex-VAT, so £1000, and hands over 10% to the VAT man.
Normal method. Bob calculates the VAT as being 20% of what he has charged out ex-VAT so £2000. He then deducts what he has paid out in VAT, £200, leaving him £1800 to pay to the VAT man.
Conor:
Flat VAT rate scheme - assume 10%: Bob calculates the flat VAT as being 10% of what he has charged out ex-VAT, so £1000, and hands over 10% to the VAT man.
Conor
I find what you’ve written here confusing please correct me I’m wrong but using your figures
£10000 ex vat work
Equals
£12000 Inc vat work
Equals
£1200 vat payment to HMRC
As you pay 10% of the total invoice value for VAT and keep the other £800 pounds for your trouble but you then can’t claim vat back except on capital expenditure by your company over about £2500.