Consulting firm refusing to pay invoice

[kempc23]

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

[cojak]

http://forums.contractoruk.com/accou...ml#post1506777

[contractoralan]

I see your point and principle.

But for the sake of 100 pounds , it is worth all the hassle.

If you are in this situation next time(recharging expenses) have it clarified before you incur the expenses on how you will invoice. if they refuse right then, negotiate an increase in rate to cover the expenses.

[contractoralan]

What I said above was based my experience. When my client refused to pay the VAT portion, I started using hotels.com for hotel booking . They do not charge VAT

Hotels.com - Customer Service

Often it is expensive than booking direct. But why should you loose over their stupidity

[kempc23]

Some good advice already, thank you.

If they are disputing a part of the invoice (essentially the difference in tax) can they refuse to pay the whole invoice whilst it is in dispute? Or can they only refuse to pay the disputed part?

[Wanderer]

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.

If they are too pig headed to accept that they are wrong and you are right then escalate the matter to the person's manager. Include links to HMRC's website where it says that this is how you have to charge VAT.

[nomadd]

But for the sake of 100 pounds , it is worth all the hassle.

No, it isn't.

IMHO, of course.

[stek]

No, it isn't.

IMHO, of course.

It's only actually £20 though isn't it?

[kempc23]

If they are too pig headed to accept that they are wrong and you are right then escalate the matter to the person's manager. Include links to HMRC's website where it says that this is how you have to charge VAT.

The person who I have been dealing with is the operations director, so there isn't really anyone to escalate it to. It is astonishing how arrogant and pigheaded she is though. Her first few emails literally said "you are wrong, case closed" even though I sent her emails from my accountant clearly stating I was correct, and also links to HMRCs advice. She just kept repeating that I was double-counting VAT. To date I have seen nothing from her accountant that referred to the specific circumstances. I sent one final email from my accountant, which even clarified for her why she was wrong in her thinking about double-counting VAT, but her response simply said "my accountant disagrees, please instruct your legal representatives to get in touch with me".

I guess the important thing is here, can they withhold payment on a £10k invoice because they dispute about £20 of it? My invoice does not contain itemised expenses (they are on separate expense sheets), but time and expenses are charged separately, so surely they at least have to pay the time, even if they refuse to pay the expenses until this is resolved?

[scooby]

The person who I have been dealing with is the operations director, so there isn't really anyone to escalate it to. It is astonishing how arrogant and pigheaded she is though. Her first few emails literally said "you are wrong, case closed" even though I sent her emails from my accountant clearly stating I was correct, and also links to HMRCs advice. She just kept repeating that I was double-counting VAT. To date I have seen nothing from her accountant that referred to the specific circumstances. I sent one final email from my accountant, which even clarified for her why she was wrong in her thinking about double-counting VAT, but her response simply said "my accountant disagrees, please instruct your legal representatives to get in touch with me".

I guess the important thing is here, can they withhold payment on a £10k invoice because they dispute about £20 of it? My invoice does not contain itemised expenses (they are on separate expense sheets), but time and expenses are charged separately, so surely they at least have to pay the time, even if they refuse to pay the expenses until this is resolved?

Chase them for late payment, but yes, if they disagree.

Why are you invoicing expenses with time? I keep mine separate for this exact reason.