Forget 'Rogue Traders' - what about 'Rogue Customers'???

Lifeisbutadream

We have had a very very awkward customer recently. We did a double dormer extension on their property and from the start had problems - they wanted to pay cash and we said no, told them if they wanted to pay contractors (i.e. plumbers, electricians etc. directly, then we would allow them to arrange themselves. We passed on details of contractors that we use - leaving it up to them who they used.

We finished the job - they owed us £1600. They wouldnt pay becaus ethey said plumber wasnt finished - we told them to take it up with the plumber - was nothing to do with us as we had not been in control of anything they had done.

They have held back the £1600 for 2 months - have now paid us, but paid us in cash and taken off the VAT!!!

I am very very angry about this - they have no right to do this and we will still have already paid the VAT - I know I can get it back on next VAT return, but that is not the point.

Mind you, they can forget it if they ever come back to us with any snags - they can use the money the saved and pay someone else to do it!!




:mad: :mad: :mad: :mad:

custardy

i would go the legal route,they have no right to withold VAT.
as to whether you do or dont pay is down to to you as its your taxes(not saying you dont)
the quoted price is the quoted price,they have just underpaid you.take the roof as security

Lifeisbutadream

custardy wrote: »

i would go the legal route,they have no right to withold VAT.
as to whether you do or dont pay is down to to you as its your taxes(not saying you dont)
the quoted price is the quoted price,they have just underpaid you.take the roof as security

I agree but we had a non payer last year for £1400 - we have spent around £400 in legal costs and although we will get the money back eventually (we have a charging order on his house), it was an absolute nightmare - I lost a lot of nights sleep over it!

This one adds up to just over £200 - they have paid the VAT on the materials, just not the labour. The amount would be expensive to go to court over - although I am so angry that they think that it is OK to do that!

I will still pay the VAT on the amount they paid us - we made a consious decision to not do 'cash jobs' and I am sticking to it - if only so that I know I have done nothing wrong...

Will certainly be putting out a warning to the other tradespeople who worked on the property though..

WoodyMax

You should report these people to your local Revenue and Customs Office as tax evaders as the VAT amount due must have been clearly shown on your estimate and or invoice for the work completed. I think Revenue and Customs will take an extremely dim view of people taking it into their own hands, deciding what taxes they will and won't pay. The benefit of this of course would be, that it is then the responsibility of Revenue and Customs to collect the tax due - meaning you would incur no costs whatsoever.

Lifeisbutadream

WoodyMax wrote: »

You should report these people to your local Revenue and Customs Office as tax evaders as the VAT amount due must have been clearly shown on your estimate and or invoice for the work completed. I think Revenue and Customs will take an extremely dim view of people taking it into their own hands, deciding what taxes they will and won't pay. The benefit of this of course would be, that it is then the responsibility of Revenue and Customs to collect the tax due - meaning you would incur no costs whatsoever.

Thanks - unfortunately it doesnt work like that - I have to pay VAT on any money earned - it is up to me to reclaim any money not paid by customers - Inland Revenue still get their money as I still have to pay it - if I didnt pay it they would take further action on our business.

Very frustrating, but unfortunately that is the way it is. Thankfully most customers do not do this!

kevinmcm19

custardy wrote: »

i would go the legal route,they have no right to withold VAT.
as to whether you do or dont pay is down to to you as its your taxes(not saying you dont)
the quoted price is the quoted price,they have just underpaid you.take the roof as security

my dads an electrician he told me a story of a plumber who didnt get paid
he had finished the job he went and removed eveything he put in, but as you say its not your fault the customer was dealing direct

thelawnet

Lifeisbutadream wrote: »

They have held back the £1600 for 2 months - have now paid us, but paid us in cash and taken off the VAT!!!

I am very very angry about this - they have no right to do this and we will still have already paid the VAT - I know I can get it back on next VAT return, but that is not the point.

How can you claim it back?

If you are VAT registered you are required to charge and pay VAT on all of your VAT-liable turnover.

It is not optional, and you cannot claim it back.

What you have actually done is received only part payment of the debt.

I.e. if it is a debt of £1600 inclusive of VAT, which is £1361.70 + £238.30 VAT

Assuming you are on the standard VAT reckoning, the fact you have issued an invoice for £1600 means you are required to pay that VAT (regardless of whether the customer has paid it yet).

If you are on the cash accounting scheme (or flat rate), then you only have to pay on amounts actually received, so in this case if he's paid £1361.70, then you owe HMRC £202.80 of VAT.

The fact that the customer has not paid part of the bill and is asking you to commit VAT fraud is irrelevant....

And on ther bad debt scheme, you can treat the £238.30 as a bad debt after six months, but you'd only be able to reclaim the VAT portion of that - about thirty quid, not the whole amount!

thelawnet

Lifeisbutadream wrote: »

This one adds up to just over £200 - they have paid the VAT on the materials, just not the labour. The amount would be expensive to go to court over - although I am so angry that they think that it is OK to do that!

It's not that expensive, just submit a claim online, don't get a lawyer involved, there's absolutely no reason to do so for such a small sum of money.

custardy

yeah even for a business debt i assume you can go through small claims.
a stern letter with details of the small claims you are intending on filing may even be enough to loosen the purse strings.

TBH i think its very cheeky given you made it clear at the start it wasnt a 'cash' deal

Lifeisbutadream

Have sent them a letter asking for the amount owed. Thanks for the advice.

Will keep you posted as to whether they pay it or not!

Lifeisbutadream

thelawnet wrote: »

How can you claim it back?

If you are VAT registered you are required to charge and pay VAT on all of your VAT-liable turnover.

It is not optional, and you cannot claim it back.

What you have actually done is received only part payment of the debt.

I.e. if it is a debt of £1600 inclusive of VAT, which is £1361.70 + £238.30 VAT

Assuming you are on the standard VAT reckoning, the fact you have issued an invoice for £1600 means you are required to pay that VAT (regardless of whether the customer has paid it yet).

If you are on the cash accounting scheme (or flat rate), then you only have to pay on amounts actually received, so in this case if he's paid £1361.70, then you owe HMRC £202.80 of VAT.

The fact that the customer has not paid part of the bill and is asking you to commit VAT fraud is irrelevant....

And on ther bad debt scheme, you can treat the £238.30 as a bad debt after six months, but you'd only be able to reclaim the VAT portion of that - about thirty quid, not the whole amount!

Am I not right in thinking that you only pay VAT on the amount that you get paid?

So for instance - we invoiced £1604.25. £1294.25 of that was labour (inc VAT) and £300 was materials (inc VAT). The customer knocked off £193.62, which was the VAT of the labour, and paid us £300 in a cheque and £1110 cash.

That makes a total that he paid us £1410. Surely I can just put that through and only pay VAT on £1410? The rest is non payment.

FOr this particulat invoice I have already paid £238.89. Would I not just adjust the next statement to £210? only making a difference of £18.89, but at least I am not paying VAT when we did not get the money.


Is that not right?