I have been with nova for 3 years without any real problems but I have found a real issue that i think you guys should be aware of.
Whilst pondering on the best way forward in terms of setting up my own ltd company or staying with nova i undercovered something that i am not over happy with.
My company through nova is VAT registered under the flat rate scheme, which means that every time Nova invoices an agency on my behalf they charge VAT at the rate of 17.5% but under the flat rate scheme a driver only has to pay over 9% of the vat leaving a surplus of 8.5% which i believe Nova have been pocketing, so for example if i earn £500.00 nova charges £87.50 vat of which 9% (£52.87) should be paid over to HM Customs leaving a surplus of £34.62 correct me if im wrong but shouldnt this be money owned by my Ltd Company which i am the only shareholder therefore my money.
So if they have been taking £34.62 per week for 52 Weeks thats £1800.00
any body out there think this is unlawfull deduction of income from a ltd company.
I can confirm that after 4 weeks with nova your company is automatically registered for Vat most of you probabably didnt know you were Vat registered
I can only assume that this is why they started giving us a 3% bonus when we processed a timesheet but even that doesnt whiegh up as they have been taking 5.5% for doing nothing other than filling out a vat form once a quarter.
So I suppose the point of my post is to make any nova drivers aware that not only have they been charging £25.00 per week but have been raiding our company funds to the tune of around £1250 per year in vat refunds.
any bodyelse out their aware of this going on.
PS before anyone posts that the vat registration figure is £63000 per year you can be volantory Vat registered.
PPS I presume that this also the case with other composite/Managed service companies.
As the current threshold for VAT registration is a turnover of over £61,000 odd, maybe I have been missing out on something here!! Or is there something else I’ve been missing? Sounds like it’s getting very sticky. Actually, what’s the 9% bit, just out of interest - I’d always assumed that the vatman would want his full 17.5%.
tallyman:
As the current threshold for VAT registration is a turnover of over £61,000 odd, maybe I have been missing out on something here!! Or is there something else I’ve been missing? Sounds like it’s getting very sticky. Actually, what’s the 9% bit, just out of interest - I’d always assumed that the vatman would want his full 17.5%.
Hi
I have been on the Customs website and there are three forms of Vat registration.
the first one is the normal one where you have sales vat and purchases vat and you offset one against the other and the difference is the amount owed to the customs and the end of each quarter.
the second one is cash accounting and this is the same but you dont pay over the vat until you have been paid from your customers but i am not 100% sure about this one.
the third one is the Flat rate scheme which is as i have mentioned the scheme that nova have chosen to use as they see a finaincial benefit. The way this one works is that you charge your customer 17.5% but you can not offset any of the Vat you pay out when you purchase any business expenditure, because you cannot offset the customs therefore only want 9% of the amount you have collected and the 8.5% surplus is the amount the customs say you would have offset had you been able to offset one against the other but the benefit here is that as drivers we have very little that we purchase that would need to be subject to Vat.
I understand there is a threshold but as i said you can volenteer for registration which is what nova has done to each and every driver.
Voluntary registration is aimed at companies who are charged more VAT than they charge. It is completely pointless otherwise.
It’s all unwravelling now isn’t it?
It needs people to demand to see their accounts and find accountants to ask NOVA some very hard questions. There could be a case for them to answer with the Police.
Conor:
Voluntary registration is aimed at companies who are charged more VAT than they charge. It is completely pointless otherwise.
Yes and no. That is true for the “normal” VAT scheme, but the “flat rate scheme for small businesses” is different. Basically you invoice as you would for normal VAT (i.e. add 17.5% to the invoice) but the difference is that you don’t just pay all that to HMR&C, you pay a fixed percentage of the total invoice instead. This actually works out to be free money if you do it right. The fixed percentage for “transport or storage” is 9% so it works out as follows:
You invoice £100, onto which you add £17.50 VAT for a total of £117.50.
You then when you do your VAT return pay 9% of £117.50 which is £10.58
You’re left with £106.92.
So basically for filling in a few forms you’ve added about 7% to your turnover.
The gripe that the OP has is that NOVA do this for you but only give you 3%, keeping the other 4% or thereabouts as a fee for providing the service.
Im not having a go at Nova here, more at the VAT flat rate scheme FRS.
Normal VAT is simple to understand, you charge 17.5% on sales and pay 17.5% on supplies.
My understanding of FRS is that you are only allowed to claim VAT back on major expenditure like vehicles or trailers. There is a lot of VAT to be paid on tyres, fuel, repairs and maintenance in a month which are probably not allowed as capital expenditure. The FRS schem will probably make things easier for an owner driver with a shoe box full of receipts but Im sure the conventional scheme is more profitable
If you’re actually running a truck and therefore have significant outgoings such as fuel, finance payments, insurance etc then you’re probably better off on the normal vat scheme.
If you have a limited company simply as a service company to reduce your tax bill then you will have very few outgoings that attract VAT (perhaps just your accountants bill and a few other small things each year) and as such the flat rate scheme is in a sense just “free money”.
If you have a limited company simply as a service company to reduce your tax bill then you will have very few outgoings that attract VAT (perhaps just your accountants bill and a few other small things each year) and as such the flat rate scheme is in a sense just “free money”.
very few things?
What about telephone, home & mobile, fuel & motoring costs, boots, overalls, wet weather gear, gloves, tools, & if you wish to bother, home office (heat, light, etc), all VAT’able?
repton:
This actually works out to be free money if you do it right. The fixed percentage for “transport or storage” is 9% so it works out as follows:
All I’m going to say on this matter is that there is no such thing as free money from the VAT man and that I doubt someone providing a service as a driver/personal service company is going to be classed as “transport or storage”.
What about telephone, home & mobile, fuel & motoring costs, boots, overalls, wet weather gear, gloves, tools, & if you wish to bother, home office (heat, light, etc), all VAT’able?
You claim 40p/mile on expenses for the fuel/motoring costs if you have a ltd company so you wouldn’t be able to claim the vat back on that anyway as it’s a personal cost not one to the company.
All the rest is perhaps only going to come to maybe 200/month tops which in the context of perhaps 2000/month invoiced is insignificant. Would you rather have 7% more on 2000quid (which is about 140quid) or get the VAT back on 200quid (which is about 30quid)?
Conor:
All I’m going to say on this matter is that there is no such thing as free money from the VAT man and that I doubt someone providing a service as a driver/personal service company is going to be classed as “transport or storage”.
Well NOVA have been doing it for years and given that HMR&C are well aware of them and what they do if it wasn’t above board it would have been stopped ages ago.
As for which category you a transport related service company would slot into, that is the one that is the closest match from the list as far as I can tell (but I must add that I’ve not actually done it myself yet so I don’t know 100% for sure that it would be accepted). If they don’t like that one then the only other option I can see is “any other activity that is not listed elsewhere” which is 10% and so by my maths works out at an extra 5.75% (before corporation tax of course) in your company’s bank account. The list can be found on this page.
Bloody hell. There’s a trick I’ve been missing out on Looking at it though, I think it either comes under “Not listed” or “Business Services” so you’re looking at 10 or 11%.
Only downside for some is that it requires willpower to ringfence 10% of incoming invoices.
Conor:
Where do you get 5.75% from or was that a typo?
Every £1 you invoice turns into £1.175 once the VAT is added.
You then pay 10% of this total invoiced amount to HMR&C, which is £0.1175
This leaves £1.0575 which is 5.75% more than the £1 you started with.
Doing the same maths for the 11% band gives you about a 4.6% gain.
Just going on from the listings on the vat website as regards the correct %,s
I thought it was a extremley grey area and contacted the Vat office in Grimsby and emphasized the job i did and they informed me i was classed as transport and storage at which point as i was not convinced asked them to fax me confirmation which they did.
So the up shot of this is that it may be beneficial to contact the Vat office to have your individual case confirmed.
peter naylor:
I thought it was a extremley grey area and contacted the Vat office in Grimsby and emphasized the job i did and they informed me i was classed as transport and storage at which point as i was not convinced asked them to fax me confirmation which they did.
Sounds good. So the maths works out as:
Invoice £1, add VAT it becomes £1.175.
Pay HMR&C 9% of that, which is £0.10575.
This leaves you £1.06925 which means you’re gaining almost 7%.
The other thing I only just spotted is paragraph 3.5 of this link which states that for your first year the percentage is reduced by 1, so for the first year of registration you’re actually only paying 8% instead of 9%, which doing the same maths turns your £1 into £1.081 so you’re actually gaining over 8% for the first year.
