Client refusing to pay VAT

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

  1. Financial-Modeller

    Financial-Modeller UKBF Enthusiast Full Member

    817 299
    So, to summarise:

    OP completed some work without agreeing terms with the client.
    OP invoiced and client has disputed VAT as there was an admin error / confusion around VAT numbers.
    OP hasn't successfully explained / clarified this admin error to the satisfaction of the client

    OP then comes on here requesting guidance and advice, receives it, but because it's not sympathestic to his belief, turns on those providing help, threatening legal action.

    :rolleyes:
     
    Posted: Oct 17, 2020 at 11:16 AM By: Financial-Modeller Member since: Jul 3, 2012
    #41
  2. JEREMY HAWKE

    JEREMY HAWKE UKBF Legend Full Member

    5,226 1,805
    Yes
    You need to go gently with these people but I dont think the OP is too far wrong
     
    Posted: Oct 17, 2020 at 12:43 PM By: JEREMY HAWKE Member since: Mar 4, 2008
    #42
  3. bodgitt&scarperLTD

    bodgitt&scarperLTD UKBF Regular Full Member

    385 161
    Not it's not. If I tell Alistair I'll do a job round his house for him for £200 and then charge him £240 (oh, but the VAT mate- gotta pay it. What? Didn't I mention it. Oh, my bad. Still, never mind, here's ya bill) he'd rightly kick off. That's what's happened here as far as I can see.

    The contractor is responsible for charging and collecting the VAT from the customer. The customer doesn't have to pay VAT- he's more than welcome to seek out a contractor who is not VAT registered, and it happens all the time in the trades.
     
    Posted: Oct 17, 2020 at 2:38 PM By: bodgitt&scarperLTD Member since: Nov 26, 2018
    #43
  4. JEREMY HAWKE

    JEREMY HAWKE UKBF Legend Full Member

    5,226 1,805

    The Op has stated that they are refusing to pay vat for a reason that is irrelevant ie The old company is dissolved when the OP is registered legally under a different number
     
    Posted: Oct 17, 2020 at 2:49 PM By: JEREMY HAWKE Member since: Mar 4, 2008
    #44
  5. Newchodge

    Newchodge UKBF Big Shot Free Member

    14,512 3,896
    The OP has stated lots of things, many of which don't ring true. They have refused to pay VAT (title), but he hasn't issued an invoice. The supply on this contract is completely different from the Ltd company's normal supply, so he can invoice as a sole trader, but this is a brand new company set up for this contract ....
     
    Posted: Oct 17, 2020 at 2:53 PM By: Newchodge Member since: Nov 8, 2012
    #45
  6. GLAbusiness

    GLAbusiness UKBF Regular Free Member

    211 40
    Here is a scenario, based on lack of clarity/contract in the engagement

    OP proposes a day rate of £600

    OP thinks that this means he charges £600 plus 20% VAT = £720
    Client thinks the day rate includes VAT, so expects to pay £500 plus £100 VAT which he can reclaim

    So, client is not avoiding paying VAT. He intends to pay VAT but has a different understanding of the terms under which the work is done

    Neither side is wrong. It is a totally predictable result of not having a clear contract which prevents the two parties from making different assumptions - both of which are totally reasonable

    I think OP should write it off to experience
     
    Posted: Oct 17, 2020 at 3:15 PM By: GLAbusiness Member since: Sep 20, 2008
    #46
  7. NicoJ

    NicoJ UKBF Regular Free Member

    282 49
    Its not irrelevant if the OP has continued to mistakenly use the VAT number associated with the old company. The client would in that case be completely justified in not paying over VAT.
     
    Posted: Oct 17, 2020 at 7:58 PM By: NicoJ Member since: Mar 27, 2017
    #47
  8. jimbof

    jimbof UKBF Regular Free Member

    184 26
    They are out of pocket in terms of cashflow they have to find - it's an extra 20% they don't get the benefit of until their next VAT payment to HMRC is due.

    HMRC won't like that if they find out. Look up disaggregation.
     
    Posted: Oct 18, 2020 at 8:20 AM By: jimbof Member since: Apr 10, 2020
    #48
  9. GLAbusiness

    GLAbusiness UKBF Regular Free Member

    211 40
    In the scenario I outlined up thread all these convoluted plans to issue an invoice without VAT are in fact red herrings.

    The basic problem may be that OP and client have not actually agreed a price. It will not matter how OP invoices, if the price is not agreed client will contest the invoice as it does not agree with client's view of the informal agreement
     
    Posted: Oct 18, 2020 at 10:35 AM By: GLAbusiness Member since: Sep 20, 2008
    #49
  10. NicoJ

    NicoJ UKBF Regular Free Member

    282 49

    Per the OP, the reason that they refuse to pay VAT is because the VAT number given corresponds to a dissolved company. In my opinion, it has nothing to do with the price of the job. Its to do with the VAT registration itself. The OP could have continued using the number associated with the old company instead of registering the new company.

    However, as always it is just speculation on our part.
     
    Posted: Oct 18, 2020 at 12:13 PM By: NicoJ Member since: Mar 27, 2017
    #50
  11. UKSBD

    UKSBD Not a real duck Staff Member

    10,230 2,009

    The OP said
    "Even though I have provided them a valid VAT registration certificate and COI certificate for the new entity."

    From my reading of that he set up a new company (with new Company ID)

    Then registered the new Company for VAT and got a new VAT ID number

    Maybe the OP can confirm,
    Have you checked that the VAT number for the new company is different to the old companies VAT number?
     
    Posted: Oct 18, 2020 at 12:48 PM By: UKSBD Member since: Dec 30, 2005
    #51
  12. Spur Support Services

    Spur Support Services UKBF Contributor Free Member

    68 13
    This may be a problem that you are worrying about too early.
    If you are quoting to a larger company, then they will expect you to be quoting net of VAT, so even if you have to clarify this it shouldn't be too much of a problem, especially if they are in a fully taxable business themselves. You may have more issue with insurance and banking clients whose supplies are primarily exempt.

    You do need a contract, which if you are VAT registered should state that your services are provided net of VAT.

    If you have a valid VAT number for a valid company, then once you have presented them with a valid VAT invoice, which should include all the relevant details, then they will process it and automatically pay you the VAT inclusive amount. Without a VAT invoice, they are unlikely to pay as they have no evidence of your contractor services. See https://www.gov.uk/vat-record-keeping/vat-invoices for what should appear on a VAT invoice.

    As an aside, with the impending doom of off payroll working (almost here, probably, but still changing), it's worth checking your IR35 status within Dave Chaplin's IR35 Shield free assessment tool (you can then purchase a status determination statement from the tool, if you wish) https://www.ir35shield.co.uk/Products?id=contractor. It may well be worth attaching a copy of this status determination statement as an appendix to your contract.

    I hope this helps
     
    Posted: Oct 18, 2020 at 12:51 PM By: Spur Support Services Member since: Aug 21, 2020
    #52
  13. Newchodge

    Newchodge UKBF Big Shot Free Member

    14,512 3,896
    That can be read 2 ways.
    a valid VAT registration certificate and COI certificate for the new entity or
    a valid VAT registration certificate and COI certificate for the new entity

    I thought you only needed a VAT registration number, not a certificate?
     
    Posted: Oct 18, 2020 at 12:56 PM By: Newchodge Member since: Nov 8, 2012
    #53
  14. NicoJ

    NicoJ UKBF Regular Free Member

    282 49

    Thats why I asked earlier if he'd mistakenly used the wrong VAT number or potentially assumed that he could use the same number.

    I read the OP as the client checked the VAT number (most agencies will do this) and it came back as the dissolved company suggesting one of the above scenarios.
     
    Last edited: Oct 18, 2020 at 1:11 PM
    Posted: Oct 18, 2020 at 1:02 PM By: NicoJ Member since: Mar 27, 2017
    #54
  15. UKSBD

    UKSBD Not a real duck Staff Member

    10,230 2,009
    yes, that's what the OP needs to clarify.
    Are there 2 different VAT numbers for the 2 different companies?
     
    Posted: Oct 18, 2020 at 1:11 PM By: UKSBD Member since: Dec 30, 2005
    #55
  16. Nico Albrecht

    Nico Albrecht UKBF Enthusiast Full Member - Verified Business

    842 173
    And here you are wrong again with a certain attitude of arrogance on top.

    This is mostly likely happen to smaller amounts as mentioned before with plumbers, electricians or small it projects where prices are quoted and no mentioned of VAT ex or inclusive.

    I can't recall ever seeing a price quoted on an expensive purchase or service that's doesn't explain the VAT element in detail.

    Your argument of industry standards is completely irrelevant, they person who hired you might be aware of that but now this is being dealt with accounts most likely and they won't take prisoners here. You quoted a price or daily rate that's what you get from accounts paid. They don't care if you are VATR registered if you are they write it off and move on. They might not even know the industry but one thing they care about is numbers!

    Your standards slipped quite a bit here. How hard can it be before commencing any work writting a quote ( example )

    My daily rate is £500 + VAT. The total amount per day would be £600 including VAT. Please confirm acceptance.

    Any smart person with certain work standards would have some sort of message trail of the service or prices that are on the higher end agreed before starting any work . For all the other stuff you have there going on not sure and don't care much. You must be really fun to work with if many things are based on assumption.

    Job done and you covered all bases. Some engineers tried to pull that ******** on us as well or service providers. They quoted a price with no Vat element mentioned and tried to add 20% later on. Doesn't fly ell in court either.
     
    Last edited: Oct 19, 2020 at 9:07 AM
    Posted: Oct 19, 2020 at 9:00 AM By: Nico Albrecht Member since: May 2, 2017
    #56
  17. iDigLocal

    iDigLocal UKBF Regular Full Member

    149 30
    If you never stated the price was excluding the VAT on the quote then that's not really their problem. If it is stated then they need to pay up. If you quote and you are VAT registered you should include prices without VAT stating they are excluding vat and have a subtotal and a vat amount and total at the bottom.

    Otherwise you are just raising the quote by 20%!

    assumption is the mother of all mistakes.
     
    Posted: Oct 19, 2020 at 9:55 AM By: iDigLocal Member since: May 9, 2018
    #57
  18. AH_2020

    AH_2020 UKBF Newcomer Free Member

    24 0
    Latest now is that client has agreed to pay the VAT, I told them if they didn’t I would get HMRC involved and they relented.

    As I have previously mentioned, manhour rates are almost always agreed excluding VAT, VAT is always charged on top. I have never had any agency or client put it to me that a manhour rate includes the VAT. Even this client has never disputed that.

    Also, it was them that gave me the rate not the other way around. I told them I was VAT registered at the earliest opportunity that I could and before payment, but not straight away when I agreed the job because nobody asked me, and you can only give so much detail when you first accept a job. They gave me a rate and it didn’t mention anything about VAT and nobody asked.
     
    Last edited: Oct 19, 2020 at 4:36 PM
    Posted: Oct 19, 2020 at 4:15 PM By: AH_2020 Member since: Oct 16, 2020
    #58
  19. AH_2020

    AH_2020 UKBF Newcomer Free Member

    24 0
    The reason I got angry on here is there seems to be an assumption that I’m at fault for the situation rather than the client.

    Bottom line is the client said they wouldn’t be paying ANY VAT even though I gave them valid VAT Certificate details, they never argued anything about the rate and whether it included VAT or not. Perhaps it was their mistake or perhaps they were just trying it on with me. I never mentioned I was VAT registered initially because I had to start the job very quickly, nobody asked me and I never had any contact Details of their Finance department until later on.

    The client has now agreed with me 100% after I told them I’d get HMRC involved.

    Any argument about the rates is irrelevant to the discussion.
     
    Posted: Oct 19, 2020 at 5:07 PM By: AH_2020 Member since: Oct 16, 2020
    #59
  20. estwig

    estwig UKBF Legend Free Member

    12,515 4,449
    How to win new clients and grow a business, threaten them with the taxman!
     
    Posted: Oct 19, 2020 at 5:18 PM By: estwig Member since: Sep 29, 2006
    #60