Client trying to get out of paying invoice

[Sapphire123]

I had a project in 2020/21/22 currently in dispute over payments

Customer signed a contract with me
Sapphire Developments

Payments were made to my old Ltd company ABC ltd that dissolved mid contract in January 21

Works continued without new contract being issued
Further paymentsmade to personal account in January 21/March21 and January 22.
Sapphire Developments

Final invoices issued in New company name XYZ ltd due in May 22 and customer agreed to pay.

Customer still has outstanding debt, for no reason other than they have just ignored my requests for payment. I have now taken a legal route on this and advised them of a deadline of payment before issuing court proceedings.

They're not denying the funds are owed and are trying to negotiate a final settlement however they now keep questioning me on the ABC ltd and I believe their solicitor is trying to find a way out of the contract

Customer’s solicitor is coming from the angle and asking several questions regarding this, as what I can see is an attempt to find a way to absolve the customer of having to pay this debt.

Their latest question their solicitor has put to me is:

“I note that you have since the inception of this matter claimed VAT however upon conducting a search of the VAT number with HMRC the VAT number does not match any UK VAT-registered business(see attached), please explain?”

I am concerned now on what the legislation is around this, and it’s left me unsure how to respond

 

[Newchodge]

Did any invoicing entity charge VAT? Is any invoicing entity VAT registered?

 

[Sapphire123]

Did any invoicing entity charge VAT? Is any invoicing entity VAT registered?

Yes first limited company charged vat and the new limited company charged vat on the outstanding invoices
Both limited companies vat registered with their own separate numbers..
Abc limited is now dissolved and new company took over operations and fulfilled rest of contract until handover of project

 

[Newchodge]

Further paymentsmade to personal account in January 21/March21 and January 22.
Sapphire Developments

It looks as if the contract was with Sapphire Developments. Why were any other companies involved?

 

[Sapphire123]

It looks as if the contract was with Sapphire Developments. Why were any other companies involved?

Sapphire Developments was a trading name of abc limited and now of xyz limited

 

[WaveJumper]

All of what you have done maybe aboveboard, and this does not answer you question directly, but you have certainly made it very confusing for clients and obviously raised some alarm bells along the way. If as you say subsequent contracts were agreed and signed, and you have been invoicing in the "correct" manner on the face of it there should be nothing stopping them from paying.

Answer the questions the solicitor has put to you, supply the relevant evidence regarding the VAT invoicing and pursue the client for payment.

 

[fisicx]

Everything hinges on the contract. The client signed a contract with ABC.

You now want them to pay XYZ.

Because you didn’t update the contract they are not obliged to pay XYZ. Get the contracts updated and you will be paid.

 

[Sapphire123]

Everything hinges on the contract. The client signed a contract with ABC.

You now want them to pay XYZ.

Because you didn’t update the contract they are not obliged to pay XYZ. Get the contracts updated and you will be paid.

Payments were made after ABC to XYZ and therefore I believe a contract was formed whether one was signed or not?
No new terms were proposed and client was happy to proceed for another year and half until the project finished
There is now a 40k balance and I believe the solicitor is trying to find a technicality to get out of paying

 

[WaveJumper]

Further to the OP's other posts on this topic why so much flip flopping with ltd companies personally I would be running a mile

And the latest I just saw above, the client being "happy" is not the same as having a binding signed contract in the correct company name.

 

[fisicx]

There is now a 40k balance and I believe the solicitor is trying to find a technicality to get out of paying

That’s what solicitors do. The contract is with ABC not XYZ.

There is a good chance you will lose your legal action unless your solicitor is better than theirs.

 

[Sapphire123]

That’s what solicitors do. The contract is with ABC not XYZ.

There is a good chance you will lose your legal action unless your solicitor is better than theirs.

Payments were made to XYZ thereafter automatically forming a contract as far as I understand.
The client happily took the work for a further year and a half .
Made payments against it and also admits liability in further correspondence
Even so much as offering a settlement offer of 26k

 

[fisicx]

No, that just means they have made payments. The contract is with ABC.

You are assuming without legal foundation. The fact that ABC is now dissolved effectively means the contract is now void.

 

[Sapphire123]

No, that just means they have made payments. The contract is with ABC.

You are assuming without legal foundation. The fact that ABC is now dissolved effectively means the contract is now void.

The client knew abc was dissolved and that xyz would take over Operations...
Operations continued as did payment..
We fulfilled original contracts obligations fully and as such the project was completed and handed over...

 

[WaveJumper]

Clearly your client had every intention of "stiffing" you on the final payment is this by any chance in the building / construction sector

 

[IanSuth]

Your best bet is to find an old email chain that makes it totally clear you had told them about the change in ltd name and that they were happy to continue the business relationship.

IF you have that I would just reply back to their lawyer saying The VAT number of abc ltd was 12345 the VAT number of xyz lts is 23456 the email messages between x date and y date (you don't have to send them, let him search that out) make it clear that saphire developments the trading name had passed between the 2 entities and your client was willing to continue the business relationship uninterupted, therefore this debt is still due, we expect payment by return.

And see how they reply.

If you do not have clear written evidence on the acceptance of continuation of the same relationship forget it and come to an out of court agreement knowing everything you get is at least something

(emails inferring a transfer has happened are not the same as "clear written evidence of them knowing and accepting the transfer")

 

[MyAccountantOnline]

Yes first limited company charged vat and the new limited company charged vat on the outstanding invoices
Both limited companies vat registered with their own separate numbers..
Abc limited is now dissolved and new company took over operations and fulfilled rest of contract until handover of project

That's what I'd tell your client and the solicitors.

The original contract may no longer be relevant but was their not an implied contract by the mere fact that you undertook work for the client presumably on the same terms and conditions?

 

[Lisa Thomas]

TLDR - Was the dissolved company solvent, or insolvent?

If it was solvent, you could ask the customer to pay the old company/Bona Vacantia then pay to reinstate the old company.

 

[pentel]

From the customers point of view and taking into account all of the changes made I would be concerned that the VAT charged may not be reclaimable.

Was the contract signed with ABC Ltd, Sapphire developments, or ABC ltd trading as Sapphire developments? Was the relevant entity VAT registered?

When ABC ltd was dissolved and payments made into your personal account did you add VAT to the invoices and were you personally registered for VAT?

When you started to invoice from XYZ Ltd was XYZ ltd VAT registered, either at the time of invoicing or subsequently?

If VAT has been charged incorrectly and cant be reclaimed I would expect the VAT element of all the invoices to be removed.

If the VAT registrations were in place it would be sensible to provide copies of the registrations thus removing this possible road block to payment