Non payment of VAT

[Graeme1979]

Hi,

I completed a project for a client a couple of years back, and the payment for the project was based on a royalty share of 30% of all income generated from sales. Every 3 months, I was due to receive payment for the income they received. The client was based in Ireland at the time the project was completed, and I never invoiced with VAT due to this.

The last royalty payment I recieved, I invoiced to the Irish address and did not include VAT. They paid, and then e-mailed me later to ask If I could resend the invoice with a different address, a Limited company in England with the same name. I resent the invoice, but now with a VAT figure and told them they would have to then pay the VAT, which they agreed to do. However, they never made payment, and I have paid the VAT to HMRC.

I have tried to contact them to pay the debt, however my e-mails were never answered, and when I looked up the company on companies house, it is now listed as dissolved. There is a wider issue of how I'm going to get hold of the royalties on the project which is still selling, but that's a different matter.

I'm just looking for advice on what to do with the VAT payment I paid HMRC but never received, is there anyway I can reclaim this, or have I just lost that money?

Thanks,
Graeme.

[TheFaQQer]

I'm just looking for advice on what to do with the VAT payment I paid HMRC but never received, is there anyway I can reclaim this, or have I just lost that money?

It's a risk of being in business - the VAT man isn't interested in whether you get the money or not, they are owed the money and they want it.

A friend of mine got hammered when an agency disappeared with £50k of invoices and the VAT man came knocking for his cut. Not a happy situation.

[Graeme1979]

Thanks for the reply. At the end of the day it could have been much worse, so at least there's that.

[SueEllen]

If they paid you any amount then you have to pay VAT on it.

If they didn't pay you then depending on how you pay your VAT you either don't pay it or claim the amount back the next quarter.

[Andrew@Wisteria]

If they paid you any amount then you have to pay VAT on it.

If they didn't pay you then depending on how you pay your VAT you either don't pay it or claim the amount back the next quarter.

If you didn't receive anything and you are registered under the cash basis for VAT then nothing should be due and you can reclaim VAT in the next return.

[Graeme1979]

I did receive something. I received the full invoice amount, minus any VAT. I normally invoiced the company at an Irish address and therefore never charged VAT. However, after they paid that invoice, they then asked me to invoice with a new address, in England. I re-invoiced, but they failed to pay the VAT due and then shut the company.

[IRMe]

Assuming for the sake of simplicity the VAT rate on your goods is 20%, and your normal royalty payment is £100 + VAT, so £120. You would repay 20% or there about to HMRC, £20. Simple enough.

This time they paid you £100. In effect they actually paid you £83.33 for your co. and about £16.77 in VAT. They happen to now owe you about another £20 which of which your co would get £16 and VAT for HMRC of £4. If you have paid too much VAT then look at reclaiming.

Something like that anyway, I have an accountant help with adding up as I run out of fingers and toes. As for chasing the remainder, going to be tricky if the company is fully dissolved already. You mentioned that the product is still being sold, by who? I guess they are the ones who owe you money perhaps it may be time to take legal advise if you can't get a response.

[Graeme1979]

Assuming for the sake of simplicity the VAT rate on your goods is 20%, and your normal royalty payment is £100 + VAT, so £120. You would repay 20% or there about to HMRC, £20. Simple enough.

This time they paid you £100. In effect they actually paid you £83.33 for your co. and about £16.77 in VAT. They happen to now owe you about another £20 which of which your co would get £16 and VAT for HMRC of £4. If you have paid too much VAT then look at reclaiming.

Something like that anyway, I have an accountant help with adding up as I run out of fingers and toes. As for chasing the remainder, going to be tricky if the company is fully dissolved already. You mentioned that the product is still being sold, by who? I guess they are the ones who owe you money perhaps it may be time to take legal advise if you can't get a response.

I did consider this, however I wasn't sure If I could rewrite the invoice to take into account what they actually paid, and claim back the difference in VAT as you have suggested. I guess there is no harm in trying.

Yes, the product is still selling, they have started a new company with a similar name, and from what I've seen on their website, transferred all their old products over to the new one. They are just ignoring my e-mails. I do plan on seeking legal advice, I'm just a little busy at the moment to go down that route, and wanted to sort out this VAT situation first.

Thanks for your help and advice.

[IRMe]

It depends on your accounting scheme, but if using cash accounting: HM Revenue & Customs: Cash Accounting Scheme for VAT then you pay based on when paid (and I assume also the amount paid) by client. The original invoice still stands, but its only part settled.