Contracting: What does daily rate really mean?

Hello,

I am about to start IT Contracting for the first time. I'm just wondering does the daily rate usually include VAT or is VAT added on top of the daily rate?

Thanks,
PeterSellers.

Rates are invaribly quoted excluding VAT. Any formal writtten quote should make this clear, though.

Your daily rate (although an hourly rate is more common) would never normally be inclusive of VAT.
If you are being offered a daily rate be sure to define what a 'day' is.....

Daily rate excludes VAT but be sure to make this clear up front.
Make sure you define what constitutes a full day or half day.
Have seen some cases where contractors define a full day as 7 hours and therefore if they work 49 hour week would charge for 7 days....

It should be exclusive of VAT. This should be stated in your contract. A daily rate for me is whatever is normal for the company. Sometimes 7 hours, other times 7.5 hours.

For me, overtime is my decision. I'm being contracted to work a 7 hour day and no more. If I do overtime it is my decision and cannot be charged for.

JMR said:

Your daily rate (although an hourly rate is more common) would never normally be inclusive of VAT.
If you are being offered a daily rate be sure to define what a 'day' is.....

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Not in my experience (of Software Development over the last 3 years anyway). Standard IT contractors contract is at a daily rate (exclusive of VAT @21%). The contract is for a 40 hour week, which translates to an 8 hour day (9am to 6pm - with an hour for lunch at your own expense). Most standard employee contracts are for a 37.5 hour week which means 9am to 5.30pm.

An hour or 2 overtime would be at your expense, if overtime was becoming a regular thing then extra pay has to be negotiated.

robd said:

Not in my experience (of Software Development over the last 3 years anyway). Standard IT contractors contract is at a daily rate (exclusive of VAT @21%). The contract is for a 40 hour week, which translates to an 8 hour day (9am to 6pm - with an hour for lunch at your own expense). Most standard employee contracts are for a 37.5 hour week which means 9am to 5.30pm.

An hour or 2 overtime would be at your expense, if overtime was becoming a regular thing then extra pay has to be negotiated.

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So when you see ads on papers for contracting rates e.g 500 per day this means 500 + vat?

Yes - I work as a buyer in services, and the rates we buy are always exclusive of VAT. Quotes from contractors generally mention that they are 'exclusive of VAT', but it is common practice in business-to-business transactions to quote rates exclusive of VAT.

(The exceptions to this include:
- where the rate quoted involves an end consumer, who ultimately has to pay the 21% or 13.5% VAT - I don't think this is applicable in this case, as the OP seemed to describe a business-to-business situation;
- where the contractor is a direct employee on a short term contract. In this case VAT is not applicable at all)

I provide payment processing service to contractors. All rates are quoted exclusive of vat. They have to be. You may not be obliged to register for vat (if your turnover is too low) so the contract cannot discriminate between a vat registered contractor and one who does not work as much and is not obliged to register. Otherwise you could take the contract work until your income reaches €35,000 then get a PAYE job for the rest of the year. If the rates is a "vat inclusive" rate then you will recive the full rate but not be obliged to charge vat and therefore kepp the entire rate as income.