VAT charged on invoice by not paid by Agency

[jimmyharris80]

Hi,

My wife and I are directors of our own Limited Company, it has come to light during a recent review with our accountant that an agency she previously invoiced and no longer works for has not paid the VAT amounts on each of her invoices, this dates back to July 2015.

I'm unclear on the reason for this at present, but before she goes back to the agency to query and request immediate payment is there anything she should be aware of with regard to claiming back-dated VAT? Any time limits?

We've checked the invoices and all of them detail VAT chargeable at 20% and the VAT Reg Number is clearly printed on all invoices so unsure why this wasn't paid.

[TheCyclingProgrammer]

I'm unclear on the reason for this at present, but before she goes back to the agency to query and request immediate payment is there anything she should be aware of with regard to claiming back-dated VAT?

What do you mean by claiming back-dated VAT? What VAT are you claiming?

Presumably you have included the VAT charged on these invoices on the relevant VAT returns and have paid HMRC the VAT owed (even though you haven't received the money from the agency)?

If so, then you should simply pursue this like any other bad debt. In the first instance I'd contact the agency and ask them why they have not paid your invoices in full and send them a copy of the invoices. It may have been a simple oversight (they might wonder why its taken you so long to get in touch with them which would be a fair point - why has it taken so long to spot this?).

I would politely inform them that they still owe you this, include the invoices and a statement of what they owe and give them a short but reasonable time to make the payment (e.g. 7 days) and that if the payment is made within this time that will be the end of the matter. If you don't get the response you want, warn them that if the payment is not made that you will be taking steps to collect the money owed and that you will be within your rights to charge them interest on what they owe you (technically you already could but I wouldn't bother if it gets paid up quickly).

As far as I can see the agency has no excuse for not paying the invoices in full if you were VAT registered and sent them a valid VAT invoice. If they had any queries over your VAT registration status the correct course of action would have been for them to query it at the time, not just not pay you.

[teapot418]

To be clear, did she detail the VAT?

e.g.

Services £1000
VAT £200
Total: £1200


Or did she say £1000. Vat at 20%.

[jimmyharris80]

Thanks both. Yes, VAT amounts have been included on the invoices and have also been paid to HMRC. It was also explicitly stated on the invoice as a separate amount with the VAT number of the company on the invoice also.

As to how it's taken this long to pick up on...it was my wife's first contract role, so a combination of nativity and an assumption that when you submit an invoice it's paid in full unless you hear otherwise. We picked it up when we started to compile year end figures and paperwork for our accountant.

She's really annoyed with herself and as an experienced contractor I should have checked everything for her as well, so definitely a lesson learned to double check everything.

In the process of drafting an email to the agency to request payment within 7 days, will post back with the outcome.

[AMS Accountants]

Hi,

My wife and I are directors of our own Limited Company, it has come to light during a recent review with our accountant that an agency she previously invoiced and no longer works for has not paid the VAT amounts on each of her invoices, this dates back to July 2015.

I'm unclear on the reason for this at present, but before she goes back to the agency to query and request immediate payment is there anything she should be aware of with regard to claiming back-dated VAT? Any time limits?

We've checked the invoices and all of them detail VAT chargeable at 20% and the VAT Reg Number is clearly printed on all invoices so unsure why this wasn't paid.

Some agencies can be funny about paying VAT to contractors unless the contractor produces their VAT certificate. I have had this happen to a few of my clients.

You can request them to pay the VAT but if they don't, you will have to take a hit on it. In theory, you already have taken the hit (if you do not operate cash accounting for VAT), as you would have included that invoice on the VAT return you submitted around that time and paid the VAT over to HMRC.

[SueEllen]

T

In the process of drafting an email to the agency to request payment within 7 days, will post back with the outcome.

Treat it as a bad debt

You need to give them longer than 7 days to pay up in the first instance otherwise if you go to court you will look unreasonable and your case can be thrown out.

Also you need to use the Post Office and Royal Mail not email as they are neutral third parties. The other side can claim, and legally get away with it, that they didn't receive the items if you don't use registered post to send the letter to their company registered address. Things like servers breaking down, people being ill and agents leaving are all valid reasons why your email is ignored.

Also the agent you are emailing is not the person responsible for dealing with the company's finances. It is some backroom person. So unless you have their details find the name of a director and send it to them via the company's registered address. (The director maybe the person who signed the contract. You just need to confirm they haven't left. )

Send them copies of all relevant invoices, copy of your VAT certificate and a clear breakdown of what they owe you plus your letter by registered post to the company registered address. (In the letter if you know the date when the first copy of the VAT certificate was sent to them state that. ) Give them 30 days to pay. Also mention you will take debt recovery action which may include legal proceedings if they don't. Make sure you mention they will be liable for all costs and interest.

You are allowed to add interest on to the outstanding amount but don't do that in the first instance. Check the contract to see if there is a limit to the interest percentage otherwise Google the payontime website and work out the statutory interest.

Then if they haven't paid after 30 days. Send them a repeat letter with interest added on. Give them 30 days to pay that.

I then would then wait an extra 5 days if they don't pay up. In the final letter give them 7 days to pay and again mention legal proceedings and they will be liable for all costs.

If they haven't paid after 10 days contact a debt collection agency like Safer Collections. While you can go to court you are allowed to use a debt collection agency instead, and the other side can be made to pay the cost of you having to use them.

The extra time around sending letters is to make you look completely reasonable if you have do have to go to court. Plus in some incidences bank transfers can get stuck in the system for 2-3 days. Just make sure you note of the dates when you need to send the letters.

[NotAllThere]

...You can request them to pay the VAT but if they don't, you will have to take a hit on it....

Strange advice. A debt is a debt. Chase through normal channels.

[missinggreenfields]

You can request them to pay the VAT but if they don't, you will have to take a hit on it. In theory, you already have taken the hit (if you do not operate cash accounting for VAT), as you would have included that invoice on the VAT return you submitted around that time and paid the VAT over to HMRC.

I'm considering moving accountants - if I move to you and just don't pay the VAT you put on the invoice, are you saying that you'll just take the hit on that?

Interesting way to do business.

[WordIsBond]

Treat it as a bad debt

Exactly, and most of what you said is great. Registered post, etc.

You need to give them longer than 7 days to pay up in the first instance otherwise if you go to court you will look unreasonable and your case can be thrown out.

I don't understand this, though. It's already PAST DUE. They've been invoiced, they intentionally didn't pay it. I'd say asking for payment within 7 days is entirely reasonable. I assume that the original invoice and contract had something to say about when payments are due. Some of this is almost a year old, interest/penalties are almost certainly already due.

The first port of call is the contract, and what it said about timely payments / interest / penalties. It may be you'd have a hard time collecting penalties/interest if you haven't been chasing this. But if it were me, I'd be calculating interest and penalties as per the contract, and saying in the letter, "If the original amount due is not paid within 7 days, then I'll be charging penalties and interest, as per the contract, in the amount of £xxxx.xx." I'd give them a chance to pay up now without penalties and interest, but let them know I'll be pursuing the whole amount if they don't pay now. That is not unreasonable, that's eminently reasonable. The fact that you haven't chased it doesn't change the fact that they intentionally paid less than the full amount on the invoice. They can't claim it is an accident, they've done it on every invoice, nor have they (apparently) given any notification that they were disputing the amount. They just didn't pay.

I wouldn't be inclined to give them a lot of time. That makes sense with a recently unpaid invoice, not with a case like this.

[SueEllen]

@WordIsBond you are presuming the agency acknowledged the VAT certificate.

I've had issues getting agencies to admit they received all appropriate VAT, insurance etc documents until my lawyer started to demand it was added to the contract that they were received on x date.

If the OP can't prove the VAT certificate was acknowledged by the agency by email then they have a problem. Give them proof it was sent and give them time to find it. As I stated in my previous post there are good reasons why emails are ignored.

Also if you turn up out of the blue and demand money from people asap in the first incidence you are likely to get SFA. The courts also expect you to give the other party "reasonable" time to sort things out and that isn't 7 days.