Re: If you're going to treat contractors as employees, kiss the VAT goodbye.
"In fact they'll often have a loss of VAT, given that many contractors (at least IME) are not purchasing large amounts of goods and therefore use the flat rate scheme."
They changed the rules on the flat rate scheme a few years ago so so that rather being the 14.5% rate any company on the FRS who are classed as "Limited Costs Businesses" * get bumped up to the 16.5% bracket - because of this for most** contractors its better to jump onto the normal VAT scheme and claim the VAT back on all allowable expenses.
* The definition of this is that they spend 2% or less of their turnover on goods.
** IME
