Contractor Rate and VAT

Ashwin2005 · Post by **Ashwin2005** » Sat Feb 25, 2006 9:31 am

A company offered a daily rate to me for three months.

(1) When signing the contract, I see a term VAT. should the rate be exclusive of VAT or inclusive of VAT. Who pays VAT?

(2) Daily rate means normally how many woking hours are included? How many days we can work in a month?

Post by **John** » Sat Feb 25, 2006 10:19 am

You are not allowed to charge VAT unless register for VAT! And if VAT is charged then no doubt the other party to the contract will require a VAT invoice from you.

As regards the answers to your questions, you really do need to read the "small print" in the contract in order to make sure of the answers.

However as regards whether the rate is VAT-inclusive or VAT-exclusive, it would normally be the case that the rate is VAT-exclusive. Indeed if the contract wording is silent on the point you would be entitled to charge VAT as well, as long as you are indeed VAT registered.

tvt · Post by **tvt** » Sat Feb 25, 2006 11:08 am

If the contract does not mention a price to be specifically VAT exclusive it is deemed to be VAT inclusive (S. 19 (2) Value Added Tax Act) and you will be unable to add a charge for VAT.

Wanderer · Post by **Wanderer** » Mon Feb 27, 2006 10:01 am

This sounds to me like someone who is an IT contractor and as such will need a Limited Company or umbrella company to work under.

Also as I was an contractor for many years I advise you to stay away from daily rates and insist on hourly. That way you don't end up working 12 hours days for no extra!

Steve

tvt · Post by **tvt** » Mon Feb 27, 2006 11:20 pm

Generally, it is better registering for VAT as you can recover input tax on your purchases. You also make the impression that you are not an amateur minnow. This may differ, however, if you work for VAT exempt or partly exempt businesses (banks and insurance companies for example) as your VAT charges will be (at least partly) unrecoverable for them.

vin123 · Post by **vin123** » Tue Feb 28, 2006 9:05 pm

I don't think this really matters now a day as most of the private sector contracts are signed for day rates.
Daily rate applies to a professional day so anything outside the professional day, say working after 6.30pm, then technically the overtime rate will come into picture.

Having said that, most of the govt IT contracts are still signed for hourly rates based on some old and outdated "tempy" terms.

Wanderer wrote: Also as I was an contractor for many years I advise you to stay away from daily rates and insist on hourly. That way you don't end up working 12 hours days for no extra!

Steve

Wanderer · Post by **Wanderer** » Wed Mar 01, 2006 10:36 am

vin123 wrote:I don't think this really matters now a day as most of the private sector contracts are signed for day rates.
Daily rate applies to a professional day so anything outside the professional day, say working after 6.30pm, then technically the overtime rate will come into picture.

Having said that, most of the govt IT contracts are still signed for hourly rates based on some old and outdated "tempy" terms.

I beg to differ, all the IT contractors I know are on an hourly rate and a quick scramble through Jobserve shows the hourly rate still prevalent.

Steve

vin123 · Post by **vin123** » Thu Mar 02, 2006 5:50 pm

Hi Steve,

I didnt say that hourly rate is not prevalent at all. I got teh info from PCG survey published sometime last year. If you are a member, log in to member section and check out the IT contractor surveys & fact.

I personally prefer day rates since it gives lot of flexibility in working hours once agreed by the client.

Wanderer wrote:
I beg to differ, all the IT contractors I know are on an hourly rate and a quick scramble through Jobserve shows the hourly rate still prevalent.

Steve

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Contractor Rate and VAT

Contractor Rate and VAT