Reply to: Invoicing without contract

[yasockie]

Yes I understand. What has happened is she has been asked to some work for someone she knows (and trusts) from another country who is working here in the UK for while. He comes from a country where hiring and firing is a lot more casual than it is here and is perplexed by the way things work here (as I clearly am). She doesn't want to create too much administrative headache for him as the experience she is getting is so valuable others are willing to do it for free (it's a bit more glamourous than my dull IT work.) But at the same time she needs to satisfy HMRC, the accountants, and any other laws of the land that may affect the arrangement.

Even when dealing with overseas customers, when doing business in the UK, I offer them a very simple contract, courtesy of PCG.
If you have a written contract, then whether there is a PO each time is less of an issue. It is not much hassle to sign a contract.
The person hiring may be from abroad, but being in UK should abide by UK rules and customs.
I'll quote an old Chinese proverb: "he who does not like the house rules can sleep in the barn" - this was apparently told by some peasant to a Chinese monarch and luckily he was not beheaded
I don't see why your SO should put her in such a bad position straight away - the other party not signing a PO or a contract clearly is dodgy, in my view.

[Cosmokramer]

Facing a similar situation myself. A friend has asked me to do ad-hoc work for him. This is minor stuff here and there. So far I have done 1 hour of work and would like to charge an hour equivalent of my day rate. There is no formal contract or purchase order in place. Would it be acceptable to submit an invoice for this?

If you look at the following link - Contracting - Do I really need a contract? :: Contractor UK

There seems to be a perception that lack of a contract or purchase order may raise eyebrows at HMRC?

This is not an IR35 issue in my opinion, its miles outside.

I just want to make sure everything is legit and I won't be raising any flags!

What are peoples opinions?

[Wils]

Not trying to be rude here but a PO is an internationally recognised commercial mechanism.

Why is there such a reticence to simply ask for one? I am sure her client is asked for and produces them all the time. Is it cash in hand stuff?

Yes I understand. What has happened is she has been asked to some work for someone she knows (and trusts) from another country who is working here in the UK for while. He comes from a country where hiring and firing is a lot more casual than it is here and is perplexed by the way things work here (as I clearly am). She doesn't want to create too much administrative headache for him as the experience she is getting is so valuable others are willing to do it for free (it's a bit more glamourous than my dull IT work.) But at the same time she needs to satisfy HMRC, the accountants, and any other laws of the land that may affect the arrangement.

[tractor]

So, I think I understand it now. If she is working with someone she trusts and is willing to accept the risk of non-payment, an invoice is all that would be needed to keep the accountants and HMRC happy.

Thanks Minstrel.

Not trying to be rude here but a PO is an internationally recognised commercial mechanism.

Why is there such a reticence to simply ask for one? I am sure her client is asked for and produces them all the time. Is it cash in hand stuff?

[Wils]

If you don't have a PO or contract in place then the risk is not that you will go to jail, just that there is a higher risk of not getting paid.

When you go into a restaurant, the waiter doesn't ask for a written purchase order before supplying you with your meal. Most people will pay before they leave, but if you do run off without paying there isn't much that he can do to get it back.

It's all about your appetite for risk.

So, I think I understand it now. If she is working with someone she trusts and is willing to accept the risk of non-payment, an invoice is all that would be needed to keep the accountants and HMRC happy.

Thanks Minstrel.

[minstrel]

I think you may have misunderstood my post. I was not suggesting I have a better way of doing it, I was asking what would happen if no purchase order was raised. e.g. would she end up in jail or something? And I explained why I was asking if it could be done without the purchase order.

Not sure why you interpreted it the way you did, but thanks for your charming response though. I look forward for an opportunity to return it.

If you don't have a PO or contract in place then the risk is not that you will go to jail, just that there is a higher risk of not getting paid.

When you go into a restaurant, the waiter doesn't ask for a written purchase order before supplying you with your meal. Most people will pay before they leave, but if you do run off without paying there isn't much that he can do to get it back.

It's all about your appetite for risk.

[TestMangler]

I think you may have misunderstood my post. I was not suggesting I have a better way of doing it, I was asking what would happen if no purchase order was raised. e.g. would she end up in jail or something? And I explained why I was asking if it could be done without the purchase order.

Not sure why you interpreted it the way you did, but thanks for your charming response though. I look forward for an opportunity to return it.

Before you do that though, make sure you precede it with factual and succinct advice on how I could sort out a problem that I've asked for advice on.

[Wils]

No offence dude, but you asked for help, got some from someone who knows how to do it (having actual experience of such, which is bloody unusual on CUK) and you come back and suggest your own way of doing it.

My advice would be, f**k off and do it your own way ! Is that better ?

I think you may have misunderstood my post. I was not suggesting I have a better way of doing it, I was asking what would happen if no purchase order was raised. e.g. would she end up in jail or something? And I explained why I was asking if it could be done without the purchase order.

Not sure why you interpreted it the way you did, but thanks for your charming response though. I look forward for an opportunity to return it.

[TestMangler]

Thanks for all the help. What is the problem with just invoicing without the purchase order?

It's a good opportunity for her and unlike us hard-nosed IT contractors she just wants to keep things as simple as possible and get on with the work without causing too much administrative hassle as the experience she is getting is invaluable.

No offence dude, but you asked for help, got some from someone who knows how to do it (having actual experience of such, which is bloody unusual on CUK) and you come back and suggest your own way of doing it.

My advice would be, f**k off and do it your own way ! Is that better ?

[tractor]

...

Thanks for all the help. What is the problem with just invoicing without the purchase order?

It's a good opportunity for her and unlike us hard-nosed IT contractors she just wants to keep things as simple as possible and get on with the work without causing too much administrative hassle as the experience she is getting is invaluable.

It has been known for an accounts department to refuse to pay invoices without a PO which is usually authorised by a budget holder. It can be a big risk relative of course to the amount of work carried out on the clients' behalf.

[Wils]

Client issues a purchase order for a number of days they wish to purchase. The terms and conditions under which the services are requested is normally on the pack of the P.O. !

Thanks for all the help. What is the problem with just invoicing without the purchase order?

It's a good opportunity for her and unlike us hard-nosed IT contractors she just wants to keep things as simple as possible and get on with the work without causing too much administrative hassle as the experience she is getting is invaluable.

[TestMangler]

Thanks for quick reply. Can you expand what call-off type arrangement means? Should she not invoice and use the purchase order instead? Sorry for being green.

Client issues a purchase order for a number of days they wish to purchase. The terms and conditions under which the services are requested is normally on the pack of the P.O. !

So, for example, the purchase order is for 60 days of services, you're Mrs does three days one week, five another, two another etc and invoices for time used at agreed intervals (weekly, fortnightly, monthly or whatever as agreed with the client). When the number of days invoiced = the number of days ordered, then the PO is considered complete and the client can raise another for more if they want.

I know some people on here will disagree, but as the PO T&C's are usually based on proper B2B type requirements, then you don't have the normal 'contract' issues like specified working hours, employee like demands from the client etc. When i got IR35'd a few years ago, I had done several contracts based on call-off PO's. HMRC looked briefly at the PO's and ignored these periods.

Most contractors have never dealt with a PO situation, so it is safe to ignore their opinions on how it works

[Jessica@WhiteFieldTax]

Two issues.

First, there is never no contract - it may be unwritten, but it's still there if work is done and payment made. I know that's pedantic, but it's important to understand the basis.

Second, is she contracting as a sole trader or through a company? I get the impression sole trader, in which case the risk if HMRC come along and challenge status is with the engaged, almost a reverse of IR35.

[tractor]

...

Thanks for quick reply. Can you expand what call-off type arrangement means? Should she not invoice and use the purchase order instead? Sorry for being green.

A framework agreement that may or may not contain a budgetted no of hours/days/weeks. PO's are called off by the client purchaser against that agreement until it runs out or is renewed.

Gov depts use them frequently. I am sure if you trawled, you could find a model agreement somewhere, maybe on the PCG site? I haven't looked for ages so I couldn't be sure.

And yes, she would still invoice quoting the purchase order number. It is important to agree the most favourable payment terms that she can up front though.

[Wils]

Tell her to get a purchase order from the client. A call-off type arrangement with a number of days purchased.

Thanks for quick reply. Can you expand what call-off type arrangement means? Should she not invoice and use the purchase order instead? Sorry for being green.