Are we liable to pay VAT and 8.5 % interest?

Blue_Max

Apologies, if this is not the right forum for this issue.
If it not could someone guide me in the right direction?

I am one of the directors of management company that looks after a block of flats. It is a non-trading, non-profit making company.

We needed some repairs to the balconies. After getting three quotes, on 7 March 2012, a contract was signed with a building contractor. Contract Sum was £26,860. There is also a 'Draft Final Account', dated 5 Sep 12, that show £26,260 as the 'adjusted final contract sum'.
In none of of these two documents, did the contractor show any VAT. Their VAT number is not shown either.
Then there are three invoices dated 5 July, 15 Aug and 6 Sep 2012. These invoices claim VAT on top of the original contract. We did not know about these invoices as were sent to the address of the managing agent.
The contractor is now saying, "if you did want to raise a dispute you would normally have to bring this about within 30 days of invoice"

Are we liable to pay VAT?

We have a managing agent who is responsible for collection charges from leaseholders and paying various bills. Without our knowledge, the agents defaulted in payments to the contractor.
The contractor claim to have phoned and emailed the agent.
But neither the contractor or the agents contacted us and informed us of the default.

As soon as we come to know these defaults (three weeks ago) we paid the original contract sum.

But the contactor is claiming fees and 8.5% interest from last September under the Late Payment of Commercial Debts (Interest) Act 1998.
The contractor is intending to issue a CC summons against us.

The contactor failed to inform us thinking that the agent is responsible.
After we heard about it few weeks ago, we investigated and paid.

Are we liable to pay these fees and interest charges?

Thank you all in anticipation of your help and advice.

00ec25

the absence of a VAT number on a quote is irrelevant, as is the mention of VAT, it is a quote after all so is not binding. What matters is what is in the contract. So what does the small print of the contract say? what form of contract did you use? was it a JCT?

I cannot imagine that the contract fails to mention somewhere that the contract sum is ex VAT as that is how any building works contract should be written

the failures of your agent are your problem, the agent is you as far as the contract is concerned, so depending on the contract wording, then yes you are liable for VAT and any consequential losses incurred by the contractor due to your (your agent's) underpayment

Blue_Max

00ec25 wrote: »

the absence of a VAT number on a quote is irrelevant, as is the mention of VAT, it is a quote after all so is not binding. What matters is what is in the contract. So what does the small print of the contract say? what form of contract did you use? was it a JCT?

I cannot imagine that the contract fails to mention somewhere that the contract sum is ex VAT as that is how any building works contract should be written

the failures of your agent are your problem, the agent is you as far as the contract is concerned, so depending on the contract wording, then yes you are liable for VAT and any consequential losses incurred by the contractor due to your (your agent's) underpayment

Thank you for your reply. I agree that "the absence of a VAT number on a quote is irrelevant" etc.
But I did not say anything about VAT number on quotes!

The two documents, that did not show any VAT, VAT number or any mention of VAT are:
1. The Building Contract was signed on 7 March 2012 with a building contractor with Contract Sum of £26,860.
2. The 'Draft Final Account', from the contractor, dated 5 Sep 12, that show £26,260 as the 'adjusted final contract sum'.

The first document states on the top "This is a Building Contract to comply with the terms of JCT Works for Minor Building Works 2011 as amended".
Terms of the JCT is not printed on the contract.

There is no 'small print in the contract. And I assure you that there is no mention of VAT in the contract.

One would have thought agent is only an agent and therefore not a party to the contract. A valid contract is between the principals of the contract. In this case the the principals of the contract are the building contactor and the management company.
Since the agent is not a party to the contract, what the agent did or did not do or failed to do is irrelevant; one would have thought!

Onus was on the contractor to inform us of default in payment.
But the contractor made a mistake in their thinking that the agent is responsible. Consequently, by not informing us it is the contactor who .failed'.
We are not to blame for the delay, because when we got to hear about it we paid the contract sum in full.

Does anyone know why the contractor is now saying, "if you did want to raise a dispute you would normally have to bring this about within 30 days of invoice" ?

antrobus

Blue_Max wrote: »

...Are we liable to pay VAT?

The question relates to a contract between a "building contractor" and a "management company that looks after a block of flats", so it's B2B and so there's no specific requirement to quote VAT inclusive prices.

Advice from the Department for Business, Innovation & Skills however does state that;

In estimates for building work, you should either include VAT in the price indication or, if this is difficult to calculate, indicate with equal prominence the amount or rate of VAT payable in addition to your basic figure.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/31900/10-1312-pricing-practices-guidance-for-traders.pdf

It would be normal for a building contractor to quote a price, and then state that VAT at the prevailing rate will be payable. Failure to mention VAT at all might perusade a court that the contract price should be deemed to be VAT inclusive. Only a real solicitor type person can help you with that one.

Blue_Max wrote: »

..
The contractor is now saying, "if you did want to raise a dispute you would normally have to bring this about within 30 days of invoice"

30 days? The Limitation Act says six years. (Or five if you're in Scotland.)

Blue_Max wrote: »

....
One would have thought agent is only an agent and therefore not a party to the contract.

It's a general principle of the law of agency, that principles are liable for the defaults of their agents. So if your agent has messed things up and caused the contractor a loss, then you are liable for that loss. Although you can, of course, seek to recover that loss from the agent

topbargainhunter

In order for the contracter to charge VAT, he must supply a VAT invoice which shows his VAT registration number. Not just a draft final account. Have you had an official invoice?

tim123456789

Can't help with the VAT but as for the interest and fees ISTM that the Payment of Commercial Debts (Interest) Act 1998 Act does not apply to this contract because, on the simplest of viewpoints, the purchasor did not sign the contract whilst "acting in the course of a business" (as is required for the act to be applicable).

Though whether there is any case law that agrees or disagrees with that, I have no idea.

tim

GDB2222

00ec25 wrote: »

I cannot imagine that the contract fails to mention somewhere that the contract sum is ex VAT as that is how any building works contract should be written

With due respect, I do not think that is correct. We have just had quotes for some major works, and all of the quotes specifically mentioned VAT. For building works in the price range of £20,000-£30,000, it is entirely possible that the contractor is not VAT registered at all.

In the absence of any indication that VAT is payable on the quotation or in the contract, the chances are that the contractor will just have to absorb the loss.

It is a little more complicated than that, as the client may have known that VAT was payable in advance of the contract being signed. if this goes to court, the judge will look at the entire "factual matrix" in so far as this is presented to him, not just at the quotation document.

As far as the agent is concerned, did the agent arrange the contract in the 1st place? What was the agent's role in all this?

Blue_Max

tim123456789 wrote: »

Can't help with the VAT but as for the interest and fees ISTM that the Payment of Commercial Debts (Interest) Act 1998 Act does not apply to this contract because, on the simplest of viewpoints, the purchasor did not sign the contract whilst "acting in the course of a business" (as is required for the act to be applicable).
Though whether there is any case law that agrees or disagrees with that, I have no idea.
tim

Hi Tim,
I forgot to mention in the OP that our management company, though non-trading and non-profit making, it is a limited company.
So would "acting in the course of a business" apply ?!
Thanks.

Blue_Max

GDB2222 wrote: »

It is a little more complicated than that, as the client may have known that VAT was payable in advance of the contract being signed. if this goes to court, the judge will look at the entire "factual matrix" in so far as this is presented to him, not just at the quotation document.

As far as the agent is concerned, did the agent arrange the contract in the 1st place? What was the agent's role in all this?

Hi GDB,
We did not know that VAT was payable. Did not even know that the contractor is VAT registered.
Don't think it matters but although a non-trading and non-profit making company, we are a limited company, but not VAT registered.

Warwick Estates, the managing agent, got three quotes for the balcony works.
We chose one of them based on price, spec and their Checkatrade membership.

Blue_Max

topbargainhunter wrote: »

In order for the contracter to charge VAT, he must supply a VAT invoice which shows his VAT registration number. Not just a draft final account. Have you had an official invoice?

We got three VAT invoices dated 5 July, 15 Aug and 6 Sep 2012. They show £26,260 the contract value
plus £5252 VAT.
However, the Building Contract was signed earlier on 7 March 2012.
Can they enter into a contract that has no mention of VAT and later issue VAT invoices and expect us to pay £5252 as VAT on top of the amount in the contract ?

Blue_Max

00ec25 wrote: »

you have a JCT contract. the fact you did not yourself get a copy of the standard conditions that go with that is your failure.

So the builder had no obligation to attach terms of the JCT to the contract?

00ec25 wrote: »

a 30 day dispute period is down to whatever your contractual terms are - if you did not obtain these in detail then you had better hope the contractor cannot produce them now since the contract clearly refers to the standard MW conditions

30 day dispute period or any other period was not in the contract.
Where are we supposed to have obtained these in detail?

Are the "standard MW conditions" part of the English Law?