Reply to: Agency Overpayment - Won't Send Corrected Remittance

[Contreras]

I'm not sure why this needs to be so complicated. If the agency managed provide a remittance to match an overpayment, then surely they can provide a remittance to match an underpayment on the next cycle.

Reconciling is done on the overall account not the individual transactions. For your own accounts, either you enter self-billing invoices or your own invoices into the ledger - the net result should be the same (eventually).

For VAT returns it depends on whether you are using normal accounting or cash accounting rules and would need to span two periods to make a difference (and even then up to ~£2k, iirc, can be corrected on a following return without needing to be declared).

If they can't wait until the next billing cycle, and they won't issue a debit note, then I would a) ask for the self-billing arrangement to be cancelled and b) be concerned about their cash flow situation!

[TheCyclingProgrammer]

They have sent me a letter explaining the over payment requesting the funds be returned, is this sufficient to be classed as a credit note? I assume not?

No. Like invoices, there are rules about what a credit note must show.

HM Revenue & Customs: Returned goods, credit notes, debit notes and VAT

Did the amount the paid you match the amount you invoiced (or that they self-billed for)? If so, just issue the credit note yourself. The original self-billed invoice and your credit note are the documents by which your bank statement will be reconciled (ignore the duplicate invoice you created for your records). Then pay them back the money shown on the credit note. Your books will balance and so will there's (the credit note will account for the money received in their accounts and the money sent from yours).

[SimonMac]

This is where it gets fun, when the agency email me they call it a payslip, as this seems to be an automated process I have never given it consideration, what they email is a "Self Billing Invoice" which I raise my own invoice for to match.

They have sent me a letter explaining the over payment requesting the funds be returned, is this sufficient to be classed as a credit note? I assume not?

Or do I issue the Agency the credit note?

[SimonMac]

This is where it gets fun, when the agency email me they call it a payslip, as this seems to be an automated process I have never given it consideration, what they email is a "Self Billing Invoice" which I raise my own invoice for to match.

They have sent me a letter explaining the over payment requesting the funds be returned, is this sufficient to be classed as a credit note? I assume not?

[Project Monkey]

A remittance is not an invoice, it is purely a record of an amount which has been paid.

If they have issued an invoice, in YourCo.'s name, which matches the remittance, then they will need to issue a credit note in YourCo.'s name.

If you raise the invoice in YourCo.'s name yourself, then just issue them a remittance advice note for the amount you are paying back to them.

It is the Invoice and Credit Note which are the legal instruments and affect the Revenue of YourCo., either on the cash or accrual basis.

+1

A remittance note means nothing in accounting terms. Yes, it's nice to know they've sent a payment, but you should be reconciling to invoices/credit notes.

[TheCyclingProgrammer]

A remittance is not an invoice, it is purely a record of an amount which has been paid.

<snip>

It is the Invoice and Credit Note which are the legal instruments and affect the Revenue of YourCo., either on the cash or accrual basis.

This is what was confusing me about OPs' post - if the agency are operating self-billing then they should surely be issuing invoices, not simply remittances when they pay him.

[craig1]

As it stands I have paper work for the money in, and a demand for the over payment to be returned, I am just wary that when it comes to my VAT Return I only have paperwork for the higher amount unless I only put the "sale" as the corrected amount rather than the invoiced amount

An £overpayment + VAT credit note would cover that. The credit note will balance VAT to the right amount on your books and you'll also be able to match the payment from your bank account to the credit note.

[Scruff]

A remittance is not an invoice, it is purely a record of an amount which has been paid.

If they have issued an invoice, in YourCo.'s name, which matches the remittance, then they will need to issue a credit note in YourCo.'s name.

If you raise the invoice in YourCo.'s name yourself, then just issue them a remittance advice note for the amount you are paying back to them.

It is the Invoice and Credit Note which are the legal instruments and affect the Revenue of YourCo., either on the cash or accrual basis.

[SimonMac]

Technically they're correct. Once issued, a remittance is a factual document and shouldn't be amended. They pay you £100 but should have paid you £80, the remittance for £100 is accurate as that's actually what they paid you and can be tied to their bank statements. From that, the process that looks neatest on books would be for you to issue them with a credit note for £20 and refund it. If they don't want to do that then you could give them the credit note and they could deduct from a future invoice but that's not as neat on the books. Treat VAT as almost irrelevant if you do it that way as it'll sort itself out on the credit note.

It's all to do with pointing bits of official paper (invoices, receipts and credit notes) at individual bank transactions. If you have to dig out emails to show to a HMRC inspector what a strange banking transaction means then you're just inviting them to dig deeper and spend more time with you.

As it stands I have paper work for the money in, and a demand for the over payment to be returned, I am just wary that when it comes to my VAT Return I only have paperwork for the higher amount unless I only put the "sale" as the corrected amount rather than the invoiced amount

[craig1]

Technically they're correct. Once issued, a remittance is a factual document and shouldn't be amended. They pay you £100 but should have paid you £80, the remittance for £100 is accurate as that's actually what they paid you and can be tied to their bank statements. From that, the process that looks neatest on books would be for you to issue them with a credit note for £20 and refund it. If they don't want to do that then you could give them the credit note and they could deduct from a future invoice but that's not as neat on the books. Treat VAT as almost irrelevant if you do it that way as it'll sort itself out on the credit note.

It's all to do with pointing bits of official paper (invoices, receipts and credit notes) at individual bank transactions. If you have to dig out emails to show to a HMRC inspector what a strange banking transaction means then you're just inviting them to dig deeper and spend more time with you.

[TheCyclingProgrammer]

All you need to do is ensure that your invoice is correct and then issue them a remittance advice referring to the overpayment by them, which has been refunded.

Under a self-billing arrangement, aren't the self-billing invoices raised by the agencies the "official" invoice? Any invoice you generate for your own records are simply duplicates and should match whatever the "official" invoice says.

If the agency are correctly issuing self-billed invoices and they overpaid in the sense that they have transferred more money than was stated on the invoice, then there is nothing to balance, you can simply transfer the excess amount back to them.

If they've issues a self-billing invoice for the "wrong" amount though, and the payment and invoice matched, then strictly speaking the agency hasn't over-paid, they have been over-invoiced and surely a credit note is required to balance not just OP's books, but their books as well (otherwise as far as the books are concerned, the invoice would be underpaid).

[Scruff]

A Credit note won't balance the books?

All you need to do is ensure that your invoice is correct and then issue them a remittance advice referring to the overpayment by them, which has been refunded.

[TheCyclingProgrammer]

Ok, so here is the story.

I am self billing with an agency, they send me a remittance and I raise an invoice to match it, one week they over payed me, 3 weeks later they finally get round to asking for the money back, they have requested the money be returned (I am fine with this) however they are refusing to send out an amended remittance for the correct amount saying "we are unable to process corrected remittances by law".

This has got me thinking, as it stands I have a remittance for them for more than I will ultimately receive from them so am concerned I will be liable for VAT on the whole amount rather than the correct amount.

Or should I ignore their remittance and just go by my own raised invoices and so the only dependency will show on my bank statement which can be explained with the email exchange kept.

You say you have a self-billing arrangement but that the agency send you "remittances". Shouldn't they be sending you valid VAT invoices if they are self-billing? You can create duplicate invoices for your own records if you wish but I would have thought that the only invoice that matters is the one that the agency send you.

Treat it as if it were you that had invoiced them for too much, which they then paid. Wouldn't you just issue a credit note for the overpayment to reduce their liability, then either refund the overpayment (balancing the credit note) or use it as deemed payment towards your next invoice.

I wonder though if under the self-billing arrangement, it should be the agency that issues the credit note. It probably doesn't matter.

[rd409]

Ok, so here is the story.

I am self billing with an agency, they send me a remittance and I raise an invoice to match it, one week they over payed me, 3 weeks later they finally get round to asking for the money back, they have requested the money be returned (I am fine with this) however they are refusing to send out an amended remittance for the correct amount saying "we are unable to process corrected remittances by law".

This has got me thinking, as it stands I have a remittance for them for more than I will ultimately receive from them so am concerned I will be liable for VAT on the whole amount rather than the correct amount.

Or should I ignore their remittance and just go by my own raised invoices and so the only dependency will show on my bank statement which can be explained with the email exchange kept.

Can you not create a credit note to go with the remittance? That would balance out the books.

[SimonMac]

<NLUK mode>
Have you asked you accountant?
</NLUK mode>

Yes, and I told myself I don't know