Reply to: VAT charged on invoice by not paid by Agency

[WordIsBond]

I am just utterly gob smacked you wasn't doing this anyway....

I got double-paid on an invoice and it took more than three months to catch it. I'm busy. I knew payments should come in, payments came in, I didn't verify amounts every month. Several contracts running, everybody was paying, of course they were paying the right amount. Dumb. At least we discovered it before the end of the contract so I could just show it as a credit on a later invoice.

My wife checks them all now.

[Old Greg]

I am just utterly gob smacked you wasn't doing this anyway....

Well it's only 10 months...

IIRC there was someone trying to go back several years for expenses they hadn't claimed some time ago.

[dx4100]

Lesson learned, always check the company bank account and rec back to invoices.

I am just utterly gob smacked you wasn't doing this anyway....

[TheCyclingProgrammer]

Good result, but they should count themselves lucky you aren't slapping on statutory interest.

Since when was "not seen the VAT certificate" justification for not paying an invoice in full? They could have verified the VAT number themselves.

[jimmyharris80]

By means of an update....

Email sent to payroll department outlining monies due and a copy of all invoices. Apparenty VAT withheld as they didn't have a copy of the VAT Certificate. Would have been nice if they'd raised that with her at the time instead of withholding it on 20 weekly invoices with no notification.

Full VAT amount will be paid in this weeks pay run.

Lesson learned, always check the company bank account and rec back to invoices.

Thanks all for the helpful advice and input.

[Fred Bloggs]

Sounds to me like they have assumed you were not VAT registered for some reason. And because you didn't pick up on it, that is the way it stayed. I doubt there will be any hassle getting the agency to pay the VAT due. But the sooner you get on top of it the better.

[jimmyharris80]

Hi All - Thanks for the comments.

We've completed a complete review of all email correspondence with the agency and there have been no issues raised by them with regard to not paying the full invoice amount and the VAT at any point during the assignment, it's just been withheld at point of payment.

Looking at all the documentation sent to them it appears she hasn't provided a VAT certificate, this could potentially be the reason for withheld payment although I would have expected a query from them once the first invoice was received outlining VAT due and the company VAT number. As other posters have mentioned, plugging the VAT number in online is an easy way to verify.

Our plan is to contact the agency/payroll dept directly via email in the first instance to request payment. If this doesn't yield a positive result we'll issue a demand via registered post with 30 days notice and take the debt collection route.

[Contreras]

You don't need to give warning of interest charges as it's a statutory right. I can't imagine how a judge could take it any other way.

With the VAT Reg Number clearly printed on the invoices, which the agency can check online for themselves, no further 'proof' should be necessary. Again, being statutory, I can't see a judge taking an alternative view.

So IMHO you could go straight in with guns blazing immediately. But...

Why waste the energy when, for the sake of an extra week delay, a subtle email or two may produce the desired result? Unless you suspect cash flow problems at the agency.

If the response is well we need to see the VAT certificate, then just do it. Save the argument that this proves nothing for another day.

If the response is can't pay/won't pay, then don't wait the 7 days just follow though with a demand by registered post immediately. In this case the only reason for not invoicing the interest immediately would be being too busy to work it out properly. Even after invoicing for interest it's still at your discretion to waive it, say if the debt was settled promptly.

On the matter of calculating interest, as I understand it, it will depend on how the part-payments of invoices have been made. If the payments reference individual invoices then you have a series of debts, each being the VAT portion of that invoice. If the payments make no reference to specific invoices then the 2nd payment will cover the missing VAT from the 1st invoice and so on.

Another option, if the agency get arsey, is to simply hand it over to a debt agency - assuming they would take it, but there can be little argument that the money is owed in this case I would have thought.

[WordIsBond]

Yes, I am presuming that. It's based on the assumption that OP / wife would have noticed earlier if agency had said, "We aren't paying VAT because we don't have a VAT certificate." I suppose I'm taking OP at face value that they had no reason to know that VAT was an issue.

But this isn't demanding money "out of the blue." They've already been invoiced, and the contract will be clear that VAT is included. That invoice IS a demand, and it is presumably fully in keeping with contractual provisions. If someone is a year late, a "pay up now" demand is fully appropriate.

Nevertheless, as you've said, if the VAT certificate hasn't been provided, especially if the agency has notified them that the VAT is in dispute because of that, then yes, appropriate time must be granted. I'd still say the agency's case would be pretty weak if they've never communicated anything about disputing an amount on the invoice. It's not ok to just pay part of an invoice and never say anything about why you aren't paying the rest, and if that's what has happened here, the courts would also say that is unreasonable.

Bottom line: Your approach was based on the assumption that the agency did not have the necessary VAT proof and so their failure to pay is legitimate. My response was based on the opposite assumption, and so their failure to pay is intentional neglect. The proper response (as far as how much time to allow) is based on whichever assumption is correct.

Though I'd say the agency is still significantly in the wrong here, even if your assumption is correct, if they never communicated about the issue (and in which case I wouldn't be overly patient with them). If they did communicate about it, of course, then OP and his wife have messed up and are going to have to make full allowances, but still should be able to get their money.

[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.

[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.

[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.

[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.

[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.

[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.