I had a contract with a consulting firm for around three months, December, January and February. To cut a long story short, they have short paid two of my invoices and are refusing to pay the amount invoiced for Feb so have put it into dispute. I am looking for advice on how to recover this.
My contract entitles me to recharge expenses up to the consulting firm, who in turn charge them onto the end client.
I have taken my gross expenses and added VAT on top, as per the advice of my accountant. So, for example, an expense of £120 which includes £20 VAT, was charged onto the consulting firm at £120 plus 20%, so £144 total. My accountant has confirmed several times this is the right approach.
Now the person at the consulting firm has told me that I should be adding VAT onto NET expenses, so charging them £100 plus VAT, so £120. They have made all the classic mistakes of misunderstanding this, saying "you are double-counting VAT" and "you are trying to make a profit on expenses". If I do this, I make a loss on every relevant expense, as I am on the flat rate VAT scheme and am unable to reclaim input VAT.
I have exchange several emails with the consulting firm. The person I have dealt with simply refuses to accept this, and flat out refuses to pay. Even when I have sent her my accountants advice by email, and a link to HMRCs advice on the matter. She told me her accountant had advised her to only pay £120, not £144. She initially refused to provide proof of this. Eventually she sent me an email from her accountants from about a year ago, which was completely unrelated- advising THEM how they should recharge THEIR expenses to their clients. She simply flat out refuses to listen to my accountant.
The final email today said that they will not pay what they owe me on dec and jan, and will put feb in dispute (this is around £10k or so) unless I amend it. The amount I will lose in this is small, only around £100 or so. However I feel very strongly on a matter of principle that I should seek repayment of the full amount. My accountant has very clearly stated my approach is correct. I should charge VAT on gross expenses, unless this is specifically excluded within the contract (which it is not).
Does anyone have any advice on this matter? I am not looking for any advice on the correct way to invoice as my accountant has assured me it is correct. How would I go around recovering this debt? I think we are past the point of the person actually being humble enough to admit to her mistake. Of course the other option is to just swallow the loss and submit a reduced invoice. However I really would like to avoid this if possible out of principle.
EDIT: Note that the feb invoice is not actually due yet, it is on 60 days payment terms, so due around end of April.
Thanks
My contract entitles me to recharge expenses up to the consulting firm, who in turn charge them onto the end client.
I have taken my gross expenses and added VAT on top, as per the advice of my accountant. So, for example, an expense of £120 which includes £20 VAT, was charged onto the consulting firm at £120 plus 20%, so £144 total. My accountant has confirmed several times this is the right approach.
Now the person at the consulting firm has told me that I should be adding VAT onto NET expenses, so charging them £100 plus VAT, so £120. They have made all the classic mistakes of misunderstanding this, saying "you are double-counting VAT" and "you are trying to make a profit on expenses". If I do this, I make a loss on every relevant expense, as I am on the flat rate VAT scheme and am unable to reclaim input VAT.
I have exchange several emails with the consulting firm. The person I have dealt with simply refuses to accept this, and flat out refuses to pay. Even when I have sent her my accountants advice by email, and a link to HMRCs advice on the matter. She told me her accountant had advised her to only pay £120, not £144. She initially refused to provide proof of this. Eventually she sent me an email from her accountants from about a year ago, which was completely unrelated- advising THEM how they should recharge THEIR expenses to their clients. She simply flat out refuses to listen to my accountant.
The final email today said that they will not pay what they owe me on dec and jan, and will put feb in dispute (this is around £10k or so) unless I amend it. The amount I will lose in this is small, only around £100 or so. However I feel very strongly on a matter of principle that I should seek repayment of the full amount. My accountant has very clearly stated my approach is correct. I should charge VAT on gross expenses, unless this is specifically excluded within the contract (which it is not).
Does anyone have any advice on this matter? I am not looking for any advice on the correct way to invoice as my accountant has assured me it is correct. How would I go around recovering this debt? I think we are past the point of the person actually being humble enough to admit to her mistake. Of course the other option is to just swallow the loss and submit a reduced invoice. However I really would like to avoid this if possible out of principle.
EDIT: Note that the feb invoice is not actually due yet, it is on 60 days payment terms, so due around end of April.
Thanks
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