Client refusing to pay VAT

Discussion in 'Accounts & Finance' started by AH_2020, Oct 16, 2020.

  1. Big4vatadvisor

    Big4vatadvisor UKBF Newcomer Free Member

    4 1
    If you ask them to pay you as a sole trader I don't think HMRC would view this kindly and it is likely they would consider it akin to disaggregation. I think the result of this would be that HMRC would still expect the VAT due on the contracting supply made by your Ltd company (even if you invoiced as a sole trader).
     
    Posted: Oct 16, 2020 By: Big4vatadvisor Member since: Jun 2, 2020
    #21
  2. AH_2020

    AH_2020 UKBF Newcomer Free Member

    24 0
    I have not yet invoiced the company and there is not yet any official contract Document between the client and my limited company. It was simply my suggestion that I could use my limited company which I thought would be more efficient than being a sole trader. I don’t believe there is anything wrong or illegal about this but would not do so if there was.
     
    Last edited: Oct 16, 2020
    Posted: Oct 16, 2020 By: AH_2020 Member since: Oct 16, 2020
    #22
  3. Mike Hayes

    Mike Hayes UKBF Enthusiast Free Member

    1,173 324
    What name is the agreement? What name was used during other communication such as in the footer of your emails? As others have said I think HMRC would take issue with this, especially where it relates to VAT. As far as I know if you have two businesses carrying out the same activity then you cannot use the VAT threshold separately for each; if one is registered the other should be registered.

    Edit, disaggregation is the word I was looking for:

     
    Posted: Oct 16, 2020 By: Mike Hayes Member since: Jan 7, 2016
    #23
  4. Big4vatadvisor

    Big4vatadvisor UKBF Newcomer Free Member

    4 1
    It is the person who has made the supply that needs to account for any VAT due and this wouldn't be determined by solely the invoicing. If the contracting service you have provided is similar to the contracting services your Ltd company normally supplies I think it is very likely HMRC would view it as a supply made by your Ltd company and, therefore, expect VAT to be charged. If you invoiced as a sole trader HMRC could take the view that you would be doing so to avoid your Ltd company accounting for VAT due in this instance.

    I think you should talk to your accountant.
     
    Posted: Oct 16, 2020 By: Big4vatadvisor Member since: Jun 2, 2020
    #24
  5. AH_2020

    AH_2020 UKBF Newcomer Free Member

    24 0
    The agreement is in my name. Also as I have stated, this job is completely different to the other jobs I have done using the ltd company. So it’s you can’t really say it’s the same activity.
     
    Posted: Oct 16, 2020 By: AH_2020 Member since: Oct 16, 2020
    #25
  6. AH_2020

    AH_2020 UKBF Newcomer Free Member

    24 0
    Actually this job was not engineering at all, but a completely different line of work.

    I would also like to point out that in my normal line of engineering work, when you are given a job offer for XX £/h by an employer or agency, it’s almost always a given that it’s VAT exclusive, it pretty much goes without saying. You can ask any contractor in engineering and I’m sure they’ll say the same thing. There is nothing dodgy or shady about this, it’s simply what I’m used to. I realise that other industries and sectors might be different, particularly where pay is lower.
     
    Posted: Oct 16, 2020 By: AH_2020 Member since: Oct 16, 2020
    #26
  7. AH_2020

    AH_2020 UKBF Newcomer Free Member

    24 0
    Seems a lot of people are jumping on the bandwagon that I’m some kind of tax evader, but this is not the case. Please don’t assume that you know the circumstances of my case and attack and make false or defamatory accusations against me when you don’t have all the facts.

    The line of work for this job is completely different to what my Ltd company normally does and I don’t believe there’s anything wrong or illegal with selecting a more tax efficient method whether that is using my ltd company or being a sole trader.

    I have not received any official contact from the client, just an agreed rate in my own name.

    If there is any suggestion that anything I plan to do is not legal, I would expect my accountant to advise me otherwise and I would not do it.
     
    Last edited: Oct 16, 2020
    Posted: Oct 16, 2020 By: AH_2020 Member since: Oct 16, 2020
    #27
  8. Opinion87

    Opinion87 UKBF Regular Free Member

    561 170
    Lol.
     
    Posted: Oct 16, 2020 By: Opinion87 Member since: Jul 1, 2015
    #28
  9. Ray272

    Ray272 UKBF Regular Free Member

    322 48
    School boy errors get marked down in this case you got 16% knocked off. Not the type of mistake one makes 15 years down the road though. Sharpen up and move on.
     
    Posted: Oct 16, 2020 By: Ray272 Member since: Jul 5, 2017
    #29
  10. Mr D

    Mr D UKBF Legend Free Member

    24,866 3,030
    It's not us you would need to convince. It's HMRC.
    Limited company can do quite a lot of things. And all be subject to vat because the company is registered.

    To seperate out for vat appears to usually take some work and seperate all the elements. A limited company director of a cleaning company going and driving a holiday coach for a week self employed may be able to do it. Most who appear to try ... Have problems.
    Perhaps you do know how to seperate the work enough working in concert with an excellent accountant.

    In the meantime resolving the matter of the company not paying?
    How much do you want to push this? If you rock the boat too hard will you lose more work than the sum in question?
    Annoying someone you charge money is not always a good long term strategy. Sometimes necessary but not automatically.
     
    Posted: Oct 17, 2020 at 12:11 AM By: Mr D Member since: Feb 12, 2017
    #30
  11. AH_2020

    AH_2020 UKBF Newcomer Free Member

    24 0
    It was unskilled work. Engineering vs unskilled I think not too difficult to argue they are different.

    Since the work was outside my normal field, I’m not too worried whether they take me on again or not, I just expect to be payed what I’m legally owed. If that means I never get work from them again, they’re not the kind of client I would want to work for again anyway.
     
    Posted: Oct 17, 2020 at 12:32 AM By: AH_2020 Member since: Oct 16, 2020
    #31
  12. AH_2020

    AH_2020 UKBF Newcomer Free Member

    24 0
    Actually the client has not yet raised any issue regarding the rate and whether it is VAT inclusive or not. So it’s best not to speculate that I got 16% knocked off like you are claiming.

    The issue is the client is not acknowledging that VAT must be declared and payed despite presenting them with a valid VAT Certificate and COI. Whatever “rate” they are paying, they cannot legally refuse to acknowledge a VAT component.

    Whatever “rate” they pay me, 20% must be declared as VAT and payed to HMRC. But because they are not acknowledging any VAT liability, they are clearly signalling that they intend to avoid paying VAT altogether, which they cannot legally do.
     
    Posted: Oct 17, 2020 at 2:13 AM By: AH_2020 Member since: Oct 16, 2020
    #32
  13. NicoJ

    NicoJ UKBF Regular Free Member

    282 49
    I'm a bit confused. You say the agency wont pay the VAT because they think the company has been struck off but they paid you the net? To a company they believe doesnt exist?

    You've said that you haven't sent them an invoice so I would suggest this is the first thing you need to do. It's easier to chase a debt if the paperwork is in place.
     
    Posted: Oct 17, 2020 at 8:05 AM By: NicoJ Member since: Mar 27, 2017
    #33
  14. Mark T Jones

    Mark T Jones UKBF Big Shot Free Member

    4,950 1,928
    OK, options:

    1 - pursue them for the payment due (they say it's VAT, in reality it is short payment). Pitch in with LBA, and decide whether its worth pursuing in court

    2. Invoice as an individual - the safe advice there is that you are running the risk of artificial separation and, if relevant, your professional insurance won't cover you. No sane person will advise that on a forum - though many will do it. So if that's your course, JFDI and bear the risk
     
    Posted: Oct 17, 2020 at 8:32 AM By: Mark T Jones Member since: Nov 4, 2015
    #34
  15. AH_2020

    AH_2020 UKBF Newcomer Free Member

    24 0
    At the moment I’m still in discussions with them about how I get paid, who do I invoice etc. Once that’s sorted and the amount agreed I will do so.

    I told them from the beginning that I had a Ltd company but they also said I don’t need to invoice them. So I’m very confused about the whole situation. I will ask my accountant to advise.
     
    Posted: Oct 17, 2020 at 8:41 AM By: AH_2020 Member since: Oct 16, 2020
    #35
  16. JEREMY HAWKE

    JEREMY HAWKE UKBF Legend Full Member

    5,226 1,805
    All the above is bollo££s

    You are vat registered this can be checked online it is not like the old days .
    If they did not know you are vat registered and you did not tell them they still owe that vat !
    They owe the Vat
    They must pay the vat
    If they dont pay the Vat then one way or the other you must kick their as£" :)
     
    Posted: Oct 17, 2020 at 8:44 AM By: JEREMY HAWKE Member since: Mar 4, 2008
    #36
  17. AH_2020

    AH_2020 UKBF Newcomer Free Member

    24 0
    Thanks, finally someone who understands my situation.
     
    Posted: Oct 17, 2020 at 9:23 AM By: AH_2020 Member since: Oct 16, 2020
    #37
  18. JEREMY HAWKE

    JEREMY HAWKE UKBF Legend Full Member

    5,226 1,805
    I understand you Alastair it is just that some of us just like the sound of our own typewriters

    I am very much like that often but having returned to the cold from my holiday I am in a very blunt and to the point mood and I am only keen on the facts today :)

    It is just not my turn today to explain where you went wrong because you never asked that . :cool:
     
    Posted: Oct 17, 2020 at 9:34 AM By: JEREMY HAWKE Member since: Mar 4, 2008
    #38
  19. Newchodge

    Newchodge UKBF Big Shot Free Member

    14,512 3,896
    That would be clever. Have the tax man chasing you for fraud! At the same time making it clear to your client, who already believes that you are trading fraudulently, that you are prepared to commit fraud.
     
    Posted: Oct 17, 2020 at 10:17 AM By: Newchodge Member since: Nov 8, 2012
    #39
  20. NicoJ

    NicoJ UKBF Regular Free Member

    282 49
    I would say the "not invoicing" bit suggests a self bill situation. If they have a valid VAT number (you've given them the correct number, not the one associated with the previous company I assume) then they must pay the VAT. Whether this is exclusive or inclusive is going to be the argument now.

    You should have had a contract before you started work, if this is with the ltd then you cant now decide to invoice as you.

    However, you seem to be putting the cart before the horse. You've not invoiced and you've not been paid so you dont yet have an issue to sort out.
     
    Posted: Oct 17, 2020 at 10:43 AM By: NicoJ Member since: Mar 27, 2017
    #40