Strange expense situation

[tractor]

..

What does your contract have to say in respect of payment terms and late payment? If it were me I would expect the Agent (the client I actually invoice) to pay my invoice/s on time regardless of their arrangements with their client. If they were late I would put them on terms and start dunning and ultimately withdraw my service if it continued.

Precisely. This is one of the things that should ring alarm bells and be ironed out in your favour when reviewing your contract even before you send it for IR35 review.

If it slipped past you at that stage, then the agent may well be able to factor your invoices but they will want a fee. I can't actually see anything commercially wrong with that IF it slipped your notice prior to you signing the contract.

[JamJarST]

So my current clientco is extremely tardy with payment of monthly expense invoices (we're talking in the region of 90 days if you're lucky, and there is a LOT of travel involved weekly), and the agent will not pay the expense invoice until they have received funds from the client ('time' invoices are at least paid on a monthly basis regardless).

Agent has spoken to client but appears unable to speed things up, which is bad as the expenses are racking up, so the agent has proposed the following 'scheme' that affected contractors can opt in to if they wish:

- For a charge of 0.5% of the full (Expense invoice) amount, agency will pay 85% of the monthly expense invoice (minus the charge) towards the end of the month, i.e. a regular payment of at least the majority of the expense invoice amount.
- Remaining 15% paid when funds are finally received from client.


This raises two immediate questions for me:

1) Anything weird with this set-up from an IR35 point of view? I mean, I'm invoicing for legit contractual expenses yet I need to pay a fee if I want most of this to be reimbursed within a reasonable timeframe.

2) How on earth would I account for that in the books? I guess I would record the 0.5% fee as a purchase of a 'payment expedition service' or similar.


For the record, contract just states 'expenses will be paid upon receipt of payment from client', so no play there (yeah yeah, should have been stated clearer I know I know, but for first contract, beggars can't choosers).

What does your contract have to say in respect of payment terms and late payment? If it were me I would expect the Agent (the client I actually invoice) to pay my invoice/s on time regardless of their arrangements with their client. If they were late I would put them on terms and start dunning and ultimately withdraw my service if it continued.

[RasputinDude]

So they want you to pay them to send you your money? OK.... Not a Nigerian company, by any chance...

Never been a contractor at Serco then? That's exactly what you have to do if you want to send an invoice through the Serco Shared Service Centre.

[VirtualMonkey]

What you describe is available from banks as a service so there's nothing IR35 about it.
Definitely agree with Mal that you shouldn't be paying it from an agency though. They get their margin for this kind of thing

[malvolio]

That's a bit sucky. Can you get the client to pay for the expenses directly rather than you paying them out of the company money and then charging them back? Or is that some bad IR35 voodoo too.

Also, I presume you are properly opted out of the agency regulations because they couldn't include a contract term like this if you didn't....

Oh thank you. I needed a good belly laugh...

[Wanderer]

So my current clientco is extremely tardy with payment of monthly expense invoices (we're talking in the region of 90 days if you're lucky, and there is a LOT of travel involved weekly), and the agent will not pay the expense invoice until they have received funds from the client ('time' invoices are at least paid on a monthly basis regardless).

That's a bit sucky. Can you get the client to pay for the expenses directly rather than you paying them out of the company money and then charging them back? Or is that some bad IR35 voodoo too.

Also, I presume you are properly opted out of the agency regulations because they couldn't include a contract term like this if you didn't....

[northernladuk]

Appreciate the advice and don't think I don't, but like I said, it was an extremely tenuous link...I'm well aware of IR35 and the key concepts, but just wanted to throw that one out there in case other more experienced types could smell any whiff of a loophole that HMRC could try and pick open. I didn't think so myself.

But by associating an issue that has nothing to do with IR35 with IR35 makes it look to us that you don't understand.

[captainham]

Like I said, you need to do some reading. Start with The Potted Guide to IR35

Appreciate the advice and don't think I don't, but like I said, it was an extremely tenuous link...I'm well aware of IR35 and the key concepts, but just wanted to throw that one out there in case other more experienced types could smell any whiff of a loophole that HMRC could try and pick open. I didn't think so myself.

[malvolio]

Yes I was reluctant to mention IR35 in this context, but I was coming at it from the angle of "The agency wants some of my own money if I want to get paid in a reasonable timeframe", so it was an extremely tenuous thought re: some sort of D&C or suchlike that I hadn't considered myself.

Like I said, you need to do some reading. Start with The Potted Guide to IR35

[captainham]

But, is your cash flow management that bad you can't cover the expenses out of your regular earnings? It's all company money, it doesn't matter where it came from.

I can probably accommodate it to be fair, but was mulling it over nonetheless. Plus I thought it was worth mentioning anyway, I myself like to read other people's posts on the latest scams etc that agents and clients are trying on!

And just a gentle reminder: not everything in contracting is about IR35. In fact, very little is, despite all the FUD. You should maybe do some more reading.

Yes I was reluctant to mention IR35 in this context, but I was coming at it from the angle of "The agency wants some of my own money if I want to get paid in a reasonable timeframe", so it was an extremely tenuous thought re: some sort of D&C or suchlike that I hadn't considered myself.

[malvolio]

So my current clientco is extremely tardy with payment of monthly expense invoices (we're talking in the region of 90 days if you're lucky, and there is a LOT of travel involved weekly), and the agent will not pay the expense invoice until they have received funds from the client ('time' invoices are at least paid on a monthly basis regardless).

Agent has spoken to client but appears unable to speed things up, which is bad as the expenses are racking up, so the agent has proposed the following 'scheme' that affected contractors can opt in to if they wish:

- For a charge of 0.5% of the full (Expense invoice) amount, agency will pay 85% of the monthly expense invoice (minus the charge) towards the end of the month, i.e. a regular payment of at least the majority of the expense invoice amount.
- Remaining 15% paid when funds are finally received from client.


This raises two immediate questions for me:

1) Anything weird with this set-up from an IR35 point of view? I mean, I'm invoicing for legit contractual expenses yet I need to pay a fee if I want most of this to be reimbursed within a reasonable timeframe.

2) How on earth would I account for that in the books? I guess I would record the 0.5% fee as a purchase of a 'payment expedition service' or similar.


For the record, contract just states 'expenses will be paid upon receipt of payment from client', so no play there (yeah yeah, should have been stated clearer I know I know, but for first contract, beggars can't choosers).

So they want you to pay them to send you your money? OK.... Not a Nigerian company, by any chance...

The 5% is their factoring fee. That's their cost, not yours. The 85% on account is not unreasonable, but you shouldn't be paying for it. Go for 75% in advance and no fees, then they may have a deal. But, is your cash flow management that bad you can't cover the expenses out of your regular earnings? It's all company money, it doesn't matter where it came from.

And just a gentle reminder: not everything in contracting is about IR35. In fact, very little is, despite all the FUD. You should maybe do some more reading.

[captainham]

So my current clientco is extremely tardy with payment of monthly expense invoices (we're talking in the region of 90 days if you're lucky, and there is a LOT of travel involved weekly), and the agent will not pay the expense invoice until they have received funds from the client ('time' invoices are at least paid on a monthly basis regardless).

Agent has spoken to client but appears unable to speed things up, which is bad as the expenses are racking up, so the agent has proposed the following 'scheme' that affected contractors can opt in to if they wish:

- For a charge of 0.5% of the full (Expense invoice) amount, agency will pay 85% of the monthly expense invoice (minus the charge) towards the end of the month, i.e. a regular payment of at least the majority of the expense invoice amount.
- Remaining 15% paid when funds are finally received from client.


This raises two immediate questions for me:

1) Anything weird with this set-up from an IR35 point of view? I mean, I'm invoicing for legit contractual expenses yet I need to pay a fee if I want most of this to be reimbursed within a reasonable timeframe.

2) How on earth would I account for that in the books? I guess I would record the 0.5% fee as a purchase of a 'payment expedition service' or similar.


For the record, contract just states 'expenses will be paid upon receipt of payment from client', so no play there (yeah yeah, should have been stated clearer I know I know, but for first contract, beggars can't choosers).