Reply to: Agency Wants Money Back

[Dominic Connor]

When ?

Was the schedule agreed after the contract, before, or as part of it ?

[Contreras]

Before I admit this to the agency, I will need to double-check legal advice, since I have paid VAT bills based on those invoices, and Christ knows what I'm supposed to do with regards to that. Also, I assume I need to refund the VAT portion of invoice as well, so will need to involve the accountant.

Issue a Credit Note for the difference between what the agency paid and should have paid (or issue a credit note for the original amount and then issue a new invoice), then adjust your next VAT return to account for the difference in VAT. The agency must adjust their next VAT return similarly but that's not for you to worry about.

What credit and debit notes must show

All credit notes and debit notes issued must have a reference to the number and date of the original invoice. They must also clearly show both the correct and incorrect amounts of VAT.

To be valid for VAT purposes a credit or debit note must:

• be headed 'credit note' or 'debit note' as appropriate
• reflect an agreed reduction in the value of the sale and be issued within one month of this agreement
• represent a genuine entitlement or claim for the amount either to be refunded or offset against the value of future sales

A valid credit or debit note must also show:

• an identifying number and the date of issue
• the name, address and VAT registration number of the supplier
• the name and address of the customer
• the reason for its issue
• a description of the goods or services
  
• the total amount credited, excluding VAT
• the rate and amount of VAT credited
• the number and date of the original VAT invoice
  

Adjustment on VAT returns

If your VAT return needs to be adjusted for credit or debit notes that apply to a transaction that occurred in a previous VAT accounting period, HM Revenue & Customs (HMRC) considers this to be a normal VAT accounting adjustment, not an error.

Processing issues: Credit Notes
HM Revenue & Customs: Returned goods, credit notes, debit notes and VAT
Notice 700 - The VAT Guide

[TheFaQQer]

When you're trying to operate as a proper business with multiple clients, and a full time staff (as I am), it's good practice to refer to contractual terms when invoicing, to ensure you're invoicing the right amount and not just trying to remember what you negotiated several months ago.

Might I suggest some kind of system of recording what you agree to. Possibly something as sophisticated as a pen and piece of paper, or even some kind of spreadsheet... A proper business might also check the contract and resolve these issues beforehand.

Aaaaanyway. It turns out it is my cock up. The contract stated the amount that the Company will invoice at each milestone. The SoA stated the amount that the Consultancy will invoice at each milestone.

Bummer. At least it's sorted out, though - daft wording, but at least it shouldn't need to go legal.

[GillsMan]

Reading between the lines here, you must have known they had overpaid you and thought you had got away with it. If it went to court neither party would win.

I would negotiate with them to split the difference.

Reading between what lines? I've explained why I wasn't sure - multiple contracts on the go, first invoice raised three months after the gig started, and so I referred back to the contract to check the amounts.

When you are a proper contractor going from one contract to the next, I accept that's a pretty difficult mistake to make. When you're trying to operate as a proper business with multiple clients, and a full time staff (as I am), it's good practice to refer to contractual terms when invoicing, to ensure you're invoicing the right amount and not just trying to remember what you negotiated several months ago.

Aaaaanyway. It turns out it is my cock up. The contract stated the amount that the Company will invoice at each milestone. The SoA stated the amount that the Consultancy will invoice at each milestone.

Company = Agency
Consultancy = My LtdCo

Christ knows why they put the amount they were billing the end-client on the contract with my ltd company, but there you go. Can't see any room for negotiation here now, I owe them the money and that's that. A painful and expensive lesson to learn.

Before I admit this to the agency, I will need to double-check legal advice, since I have paid VAT bills based on those invoices, and Christ knows what I'm supposed to do with regards to that. Also, I assume I need to refund the VAT portion of invoice as well, so will need to involve the accountant.

What a mess. Anyone who thinks I was trying to pull a fast one can do one though.

As promised, I'll keep you posed, but it looks like I'll be paying it all back anyway.

[Ketchup]

Reading between the lines here, you must have known they had overpaid you and thought you had got away with it. If it went to court neither party would win.

I would negotiate with them to split the difference.

[Safe Collections]

Hi all,

Thanks for the advice and I definitely think that making an offer is the sensible way to proceed. Interestingly, since their phone call on Friday, they've yet to follow it up with an email detailing the discrepancies. Until they do, I won't be doing anything.

But once (if) I do receive formal notification, I'll definitely look to make an offer and negotiate. It's sensible and probably the fairest thing.

If you do negotiate, don't forget to do it without prejudice.

Just in case

[GillsMan]

Hi all,

Thanks for the advice and I definitely think that making an offer is the sensible way to proceed. Interestingly, since their phone call on Friday, they've yet to follow it up with an email detailing the discrepancies. Until they do, I won't be doing anything.

But once (if) I do receive formal notification, I'll definitely look to make an offer and negotiate. It's sensible and probably the fairest thing.

[Old Greg]

I think your best bet is to negotiate with the agency and come to some sort of compromise - you are both at fault for the reasons you mention here but the mistakes made sound as though they were just simple human error caused by trying to sort things out in a hurry. If either party went down the legal route I would imagine you would be advised to arrange a compromise and that way, although you may both be a little out of pocket, you can walk away with an amicable agreement - you never know when you may need each other

+ 1

Split the difference? Make the offer and document it so you can take the evidence that the offer was made and rejected if it gets to court.

[Untouchable1]

It sounds like a genuine error that neither parties spotted - split the error in 2 and both take a hit.

Untouchable1

[LisaContractorUmbrella]

To answer Lisa's question:

I billed the UK-based agency. They billed the European client. My feeling is that the client has been billed based on the lower amount, whereas the agency has paid my LtdCo based on the higher amount. So the agency is out of pocket and, understandably, looking to resolve it.

TheFaQQer's question - and it is a good question - I have many clients on the go at any one time. At the time when I agreed this piece of work, I had six concurrent clients, mostly on a fixed-price basis.

I came to issue my first invoice some three months after beginning the work, as that is when I hit the first milestone. So, to ensure I invoiced the correct amount, I referred back to the contract and billed the amount specified in the contract. This first invoice was paid. Subsequently, the next two invoices were paid as well following my invoices.

Being fair, I think both myself me the agency have cocked up here. The agency cocked up by including a different price in the contract than the SoA. I cocked up by not noticing that discrepancy.

So we then need to ascertain which price was correct. With negotiations being handled over the phone and then formalised in the contract and SoA we are left in a situation where the formal documentation includes two different prices.

I appreciate that it doesn't look good that the amount I billed is the higher of the two specified amounts, but I genuinely would have billed whatever the contract said even if it was the lower amount.

I don't think this is black and white, and I'm certainly not looking for people to tell me what I want to hear (namely, that I was right to bill as per the contract and I can tell the agency to do one) so happy to hear all views, including those that tell me I've cocked up and need to honour the price the agency put in the SoA.

I guess the main question is: which supersedes the other: the contract, or the SoA?

I think your best bet is to negotiate with the agency and come to some sort of compromise - you are both at fault for the reasons you mention here but the mistakes made sound as though they were just simple human error caused by trying to sort things out in a hurry. If either party went down the legal route I would imagine you would be advised to arrange a compromise and that way, although you may both be a little out of pocket, you can walk away with an amicable agreement - you never know when you may need each other

[d000hg]

Who were you billing? If the company was outside UK then it would be reasonable to assume that the contract amounts should have been in Euro's and therefore the contract was wrong and the schedule was correct

Not really, often the business will be conducted in the currency of the service provider... my euro client is billed in sterling but my US sub-contractor also bills me in sterling.

[Boo]

...
Essentially, the contract stated that the amounts to be invoiced by my company were (say) £10K, £8K and £8K. However, they have pointed to a Schedule of Arrangements which specifies the amounts should have been (say) £8K, £6K and £6K.

...

So...what would you do?

I'd keep the money. Just say that your invoices are correct according to the contract and you have been paid correctly and there is no further room for discussion. IANAL but I really doubt a court would overturn the status quo so I think you are onto a winner.

Boo2

[Wanderer]

"These terms constitute the entire understanding between the parties, and no addition, amendment or modification of these terms shall be effective, unless in writing and signed by each party"

That, I think, makes it slightly more difficult for them to argue that the SoA takes precedence.

Really it comes down to deciding if you want to come to a compromise as a gesture of goodwill (ie, will you get more work from this agency?) or if you want to hold them to the contract and potentially force them to argue it out in court.

Before everyone gets on a guilt trip about this, ask yourselves what would happen if the situation was the opposite way around, what would our chances be of getting money out of an agency?

What was your understanding of the amount chargeable for the work? Was it the contract amount or the SoA amount?

[BlasterBates]

Personally in this instance I would accept what was supposed to be paid. In view of the mess up by the agency I would however demand some verification.

I think this isn´t black and white and probably not worth a legal battle since both values were in the contract. Perhaps get some compensation from the agency for making this rather silly mistake.

In the end the client paid some money and the fair value is a that value minus a margin.

[GillsMan]

Yeah, closing the company is not an option with multiple clients and a full time permie member of staff on board. If it comes to it, I'll just reimburse them the £5-6K.

However mudskipper made a really good point which prompted me to go back to the contract. Sure enough, Clause 11.5 of the contract states:

"These terms constitute the entire understanding between the parties, and no addition, amendment or modification of these terms shall be effective, unless in writing and signed by each party"

That, I think, makes it slightly more difficult for them to argue that the SoA takes precedence.

The agency haven't yet followed up their initial phone call with something in writing to my email, so until they do there's nothing for me to do. Once I do, I'll get some legal advice. Whether. It works in my favour or I end up having to reimburse part of their money, I'll definitely report back.