Issued a VAT invoice but the customer didn't pay the VAT

CramCycle

They gave a story that they don't have our type of business as part of their suppliers list (work was consultancy, our business name is after our family home with the word farm in it). I am VAT registered but they just want to pay me the amount and not to the business. Do I report them to revenue. They asked me to reissue the invoice in my name not the business name and they just paid the amount without VAT.

From what I can tell, I have 3 options (I am not letting them pay me directly, I want it to go through the business).

1. I take the hit, reissue an invoice where instead of €X+23%, it is now €X including VAT and then cut ties.

2. Reissue them an invoice ex VAT, let them sort it with revenue, but I am pretty sure I am not allowed do this but I am not sure, clarity here would help.

3. Cut my losses, return €X and don't do business with them. I have to return the money in instance 3 because I know they will write an invoice with my name on it and I ain't getting in trouble.

newmember2

What's your business name got to do with anything? If you were operating as a business then you need to invoice them with VAT added unless they give you a VAT number. Anything else on their part is just them trying to rip you off. Who did you make the invoice out to?

If they refuse to pay the bill in full, is there nothing can be done to encourage them where you don't lose out? Sue them for non-payment?

CramCycle

https://www.boards.ie/discussion/comment/120770585#Comment_120770585

If I have their VAT number am I allowed simply invoice them ex VAT? I might just reissue the invoice if that's the case. They are a small company people wise but plenty of money. I was warned locally to stay away from them but stupidly seen my first proper job since opening. Not going to sue as they are local, just cut my losses and hopefully others will take the warning I didn't.

paul71

https://www.boards.ie/discussion/comment/120770696#Comment_120770696

No you are not entitled to do that. If you are VAT registered and have provided a VATable service or VATable good to a customer in Ireland you must charge VAT. They are simply refusing to pay from my reading and you should sue.

CramCycle

https://www.boards.ie/discussion/comment/120772645#Comment_120772645

They are also VAT registered and I have checked it on VIES. Is it definitely not allowed to issue an invoice stating ex VAT? I am new to this and just didn't expect it from someone who is local in my community but should not be surprised.

As in when I do my returns next week, I include the invoice but I state that I did not collect the VAT and give revenue their VAT number. Sorry for the silly questions, it just caught me off guard.

paul71

https://www.boards.ie/discussion/comment/120772855#Comment_120772855

Honestly CramCycle, I sympathise, but you cannot do that. If they are established, VAT registered and are doing this to you I would describe them with a 4 letter word begining with s and ending with m. They are completely aware of what they are doing and it amounts to theft.

You cannot issue an invoice without VAT, the question you must ask is what did I sell them and is that Zero rated or VAT exempt? Did you sell them zero rated foodstuffs like vegetables? Did you provide VAT exempt services like insurance or Medical care? If not you must charge VAT. The only recovery you can get is to write off the balance owed by a credit note whereby you can recover the VAT amount of the portion unpaid, or sue for the full amount.

The other way is to buy something from them and not pay.

daheff

Something smells very wrong on this.

If they are a VAT registered company, then what does it matter to them if you charge them VAT? They can claim that back off Revenue. All they are doing here is being difficult and not paying you fully.

Issue correct invoice to them with the correct VAT amount. If they fail to pay the debt in full then start debt collecting process (as a small business its something you will unfortunately need to get used to).

And stop selling in future to them unless its COD.

DBK1

https://www.boards.ie/discussion/comment/120772855#Comment_120772855

No you cannot issue an invoice stating ex vat.

Basically if you’ve issued an invoice for €1,000 plus vat at 23% you are owed €1,230.

If your customer have now paid you €1,000 then they still owe you the €230.

You cannot tell revenue “they didn’t pay the vat, sorry about that.” Of the €1,000 they have paid you, you now owe revenue the vat portion of that money. So effectively your customer have paid you €813.01 for the service you provided plus €186.99 in Vat (23% of €813.01). You now owe revenue this €186.99.

Your customer still owes you €230 which when you collect that is broken down as €186.99 for you and €43.01 for revenue.

There are certain circumstances where a company are exempt from vat, such as if over 75% of their sales come from sales outside of Ireland. In this circumstance revenue would have issued them a Vat 56B number which they should provide you with and you put this on the invoice which then allows you to show their vat rate as 0%. But I highly doubt this is the case or they would have provided you with this information as they would be used to doing that for all of their suppliers.

What I would do first is issue them a statement showing the payment they gave you and stating what the remaining balance on their account is and see what the reaction to that is first before taking any more drastic action.

paul71

Just so I am absolutely clear Cram.

There is no possible way that your work could be construed as construction or related to the construction sector?

CramCycle

https://www.boards.ie/discussion/comment/120773484#Comment_120773484

No, it was administrative/clerical work.

CramCycle

https://www.boards.ie/discussion/comment/120773329#Comment_120773329

I am just going to reissue the invoice as (taking your example) as €1000including VAT and take the hit of the €187 (which is what the VAT to revenue would be), so revenue will get the VAT paid so far and then never do business with them. They are saving pittance and I am learning that people are sh1t.

I presume if I issue them a statement then showing payment, I am out more with revenue as I have to pay the €230 VAT with my first return.

I presume this is OK? or are you saying that no matter what I have to issue the balancing statement.

Just to be clear, under no circumstances am I suing them or taking them to task over so little money, I just want my books squared away nicely. I have loads of other business in already so don't need the stress or hassle.

CramCycle

Also they are not exempt from VAT @DBK1 as I was helping them organise clients and they are all in the Irish Republic

AndrewJRenko

Was there any quotation given to them before work started, and did this reference VAT?

SureYWouldntYa

The fact they are VAT registered and could just claim back the VAT paid over to you on their own next VAT return is the most confusing part of all of this

20/20

Forgive my ignorance but if you issue another invoice for what they did pay over and the lower VAT on this amount. What is to stop the company in question returning both invoices to Revenue and reclaiming the VAT on both invoices ?

Jim2007

https://www.boards.ie/discussion/comment/120773862#Comment_120773862

If it were me there is absolutely no way I would be so accommodating, but then again I have a lot of experience of knowing blood out of stones!

These people are this way because they have been allowed to get away with this in that past. The reality is that you are not going to do business with them again and you’re probably going to take a hit anyway, so there is nothing. I’d tell them in person (not in writing or email) that the invoice is to be paid in full in seven days and if it is not three things will happen:

• The Revenue will be informed
• A complaint will be made to the Garda as there is a question of coercion in a potential fraud
• The debt will be sold to a debt collector and they can deal with them not you

Don’t engage them in discussion or negotiate with them simply deliver your message and walk away. As someone else pointed out there is something off about their reluctance to process the VAT, so putting the wind up them might yield results. If not you are no worse off.

Unfortunately the down side of being self employed is that you have to ensure you get paid and there are those who will try to take advantage of you. As you gain experience you’ll get stronger and you’ll develop a nose for avoiding those situations.

One thing I’d advise you is to never ever get involved in peoples little games and schemes because when you do you give them power over you. And since these people are not exactly honest people to start with, they won’t hesitate to use to screw you over again if they need to.

newmember2

https://www.boards.ie/discussion/comment/120772645#Comment_120772645

I'm not following this. If I purchase a good as part of my business, I can supply the seller my VAT number and get the good ex VAT.

CramCycle

https://www.boards.ie/discussion/comment/120775295#Comment_120775295

I think he is saying you can't with a few exceptions

CramCycle

https://www.boards.ie/discussion/comment/120775246#Comment_120775246

I presume I issue a credit memo at the same time as the invoice and include all in my returns.

Coyote

i think your going about it the wrong way, don't issue a new invoice.

if they are vat registered they should not care that vat is added as they can claim it back, but by not paying you and claiming back the full vat amount they are getting the work at a discount.

if you issue them a second invoice they might try to claim that back as well?

pay the full vat on the invoice to revenue, it's only a small difference (€43) take the hit in the short term and claim back the vat and write it off as bad debt at the end of the year and never do business will them again, you were told of issues with them before you started by others, most business won't say bad things about other business as they can be sued and they have assets to lose, so if people are warning you it tends to be true.

From chat gpt on this, (I'm not an accountant and nether is chatgpt)

In Ireland, VAT is generally based on the invoice issued, not the amount the customer actually paid. When you issue an invoice for goods or services, the VAT is usually applied to the total amount of the invoice, and this is what you are required to report and pay to the Revenue Commissioners.

However, in the case of bad debts (where you are unable to recover the money from your customer), you may be able to claim relief on the VAT element of the bad debt, provided you meet certain conditions set by Revenue. These conditions include that you must have already paid the VAT to Revenue, the debt must be written off in your books as a bad debt, and the debt must be over six months old but less than four years old.

Please note that this information is accurate as of my last training cut-off in September 2021, but the rules may have changed after that time. For the most accurate and up-to-date information, you should consult with a tax professional or directly with the Revenue Commissioners in Ireland.

Write off the shortfall, and never deal with them again.

The post above with the example of the €1,000 plus €230 VAT now becoming €813 plus €187 VAT is spot on.

Also if you are on the cash basis for VAT you wouldn't have to pay the VAT on €230 til such time as you get paid that balance by your client anyway.

mrslancaster

....work was consultancy, our business name is after our family home with the word farm in it). I am VAT registered but they just want to pay me the amount and not to the business...

Probably easy to fix OP.

Is your vat registration number in your personal (sole trader) name or a registered limited business name (home + farm) ?

If you personally are on a list of their approved suppliers and the invoice you issued is from the name of the farm, their system will flag it. They are not paying the vat portion until that is resolved.

Could you re-issue the invoice as Mr CramCycle t/a HouseNameFarm? That should work for them.

paul71

https://www.boards.ie/discussion/comment/120794914#Comment_120794914

And that there is a direct breach of law. Fines, interest and penalties.

mrslancaster

https://www.boards.ie/discussion/comment/120798158#Comment_120798158

What is?

OP said he is registered for vat. Maybe he has a website in the farm name. Maybe he doesn't have the business name registered. Maybe it is/isn't a limited company.

If he's a sole trader and has registered the business name why can't he invoice that way?

Bass Reeves

https://www.boards.ie/discussion/comment/120775286#Comment_120775286

This is the advice to follow. Even if the f@@kers are local of you get turned over once you will again.

The name of a company on an invoice is immaterial it's the services provided that count. Just bill for remaining amount due.

CramCycle

I appreciate all the advice from everyone. Here is what I did in the end.

I issued the new invoice for the price including VAT so I am making a small loss. They then rang me saying that their accountant claimed they couldn't use that invoice and that they would just write one up for me with my name on it. I told them under no circumstances to do this. I think I figured out the issue with their accountant who seems to be just someone working from home with SAGE, since we aren't intra EU registered, we aren't coming up on their VAT number check. After a quick google I actually emailed them how to fix the issue but they said no, I also sent them my confirmation letter from revenue and told them since we aren't intra EU they would have to ring revenue if they didn't believe me.

I also wrote a credit note for the first invoice, so that they can't use it. A bit of the pain in the arse, I already knew I wouldn't be doing business with them again but then I received an email to look over a project for them. I have not responded, hopefully they take the hint as I have remained civil thus far.

Anyway, from my point of view, I think I have all my I's dotted and T's crossed. Made a small loss but a small price to pay to know to stay away from them. Already have a load of other business coming through so happy out.

Happy that if Revenue look at it, I have done everything above board.

SouthWesterly

Don't ignore them . Write and say that due to the difficulty you had being paid by them last time that you wont be working for them again.

paul71

https://www.boards.ie/discussion/comment/120800589#Comment_120800589

Because to do so would be a deliberate evasion of the duty of a VAT registered person to account for VAT on their invoicing, that is why.

CramCycle

https://www.boards.ie/discussion/comment/120800589#Comment_120800589

I have a registered business name via the CRO and the company is VAT registered

mrslancaster

https://www.boards.ie/discussion/comment/120830192#Comment_120830192

Where did I say to issue an invoice without showing or charging vat? You have some cheek posting here that I was suggesting anything dodgy.

The original invoice was paid net because it sounds like the approved name on the customer system didn't match the name on the invoice. The OP is vat registered in his own name and if he has a registered business name he can issue invoices from that business. If the customer is refusing to pay the vat element because the vendor verification doesn't match, then OP needs to issue the Vat invoice in the correct name.

I never mentioned issuing a credit note or invoicing without charging vat. You seem to be mixing me up with someone else.

paul71

https://www.boards.ie/discussion/comment/120832686#Comment_120832686

He is VAT registered, his trade is clearly under that registration. He issued the invoice under that trade, to suggest re-invoicing under another is clear evasion. It would be pulled in moments in an inspection, it would lead to a 100% penalty for deliberate evasion. It is not cheek, it is 30 years of experience of dealing with Revenue audits.

Stop giving dangerous opinion that is the remit of professions.

DFB-D

https://www.boards.ie/discussion/comment/120825776#Comment_120825776

Intra EU?

Is the customer not in Ireland?

There are a few circumstances where you either 0 rate the invoice (place of supply is EU), charge no VAT (place of supply outside of EU) or the purchaser does not pay VAT to the supplier VAT 56.

You should probably run it by your own accountant or tax advisor, asking these things on a forum which is answered by random people (however well meaning) is unreliable.

CramCycle

https://www.boards.ie/discussion/comment/120855925#Comment_120855925

Intra EU as that's where it shows up on VIES if you want to check easily. I thought that's what might have happened when their accountant couldn't confirm our VAT number on their system. It wasn't that anyway.

The advice here has been excellent bar one or two people misunderstanding each other and that might be as much to do with me not wanting to give too much info away in case it was possible to identify them, or them me.

DFB-D

https://www.boards.ie/discussion/comment/120855987#Comment_120855987

No offense, but "excellent" is your own opinion based on you not having the complete information regarding VAT legislation.

And you haven't given the complete information either.

And further, it doesn't sound like you have received complete/accurate information from your customer either.

I have said there are tax compliant reasons why a company may not expect to pay VAT on your invoices, I suspect you may have this issue again in the future and you haven't really dealt with it, and it seems like you are souring a potential repeat customer assuming they are trying to defraud you.

It is highly unusual for VAT numbers to be checked against VIES in domestic VAT processing and for the customers accountant to reject your invoice and to suggest to help you create a correct version, they must have had a basis for doing so.

CramCycle

https://www.boards.ie/discussion/comment/120857257#Comment_120857257

No offense, but "excellent" is your own opinion based on you not having the complete information regarding VAT legislation.

Plenty of jobs I have worked in had me looking over VAT and invoices. I done the books for my father for years without issue. It just threw me when they said it, as it just never happened before, so I thought best to check. I have dealt with RCTs etc. in other jobs so am aware of exceptions. Knowing this company and their turnover, it threw me a bit so I thought best to double check. Looking at my OP, the question was, I am pretty sure I can't do this but just checking. We are a small company starting out. I have family who are accountants but didn't want to ask them. I also could have kept digging on revenue and eventually came to the same solution. I didn't take anyone's advice as gospel and did in fact double check anything I acted upon.

I have said there are tax compliant reasons why a company may not expect to pay VAT on your invoices, I suspect you may have this issue again in the future and you haven't really dealt with it, and it seems like you are souring a potential repeat customer assuming they are trying to defraud you.

None of those reasons are applicable here, I also don't think they were trying to defraud me as they gain nothing from their actions (again, this threw me, it didn't make any sense to me). I have seen their accounts, it would cost them nothing. It would also have been insignificant in terms of their annual turnover. Their accountant appears to be a one person show, who can't seem to work SAGE. Their reasons for not paying VAT changed 3 times inside of a week. In fact they and their accountant both gave different reasons on the same day. One where they claimed it was better for me as I wouldn't have to pay the VAT to revenue.

Personally having overheard others in the area talking about them, it would very much appear to be a manoeuvre to make me feel like I owed them something. I won't go into one of the larger issues from their former company as they would be easy to identify but needless to say, I am less trusting of them, whatever their actual reasons. I am only new to the area so this was all new to me. I also would later find out that one of the people who works for them has it hidden from everyone that they work there, their reputation is so bad.

I also don't need their repeat business so no loss that way either.

It is highly unusual for VAT numbers to be checked against VIES in domestic VAT processing and for the customers accountant to reject your invoice and to suggest to help you create a correct version, they must have had a basis for doing so.

Their accountant said they couldn't confirm my company's VAT number, I had presumed maybe they just used VIES as they are a one person show. I had sent them documentation from revenue showing it and also had to tell them that if they would have to ring revenue if that wasn't enough. They replied and kept saying it wasn't confirming for them. It would later turn out that they simply didn't know how to use SAGE, which has a known issue with newly registered non intra EU Irish VAT numbers. I even found the solution, typed it out for them and sent it to them. To this I then received a different phone call from the MD (small company employee wise), explaining that they name of my business would set of a red flag with revenue and that they were just going to pay me to my personal bank account and make up an invoice for me (I don't think I went into this earlier in the thread, can't remember). I had to tell them that this wasn't appropriate for a multitude of reasons but they were very clearly trying to make it sound like a favour to me. They were not trying to help me create a correct version, they were attempting to help me commit fraud, whether intentional or not. I done this work as part of my business and they wanted to pay me directly, make up an invoice, and act to revenue as if I was a small time consultant that wasn't VAT registered. For a variety of reasons I don't want to go into, this was not acceptable to me.

Like I said, thanks everyone for all the help and concern, it is all sorted now and I am happy for the thread to close.

For those who asked earlier in the thread, I sent them a credit note for the first invoice just in case they did attempt to use it. I have left them with the second invoice. If they make up an invoice or not, I have paid the VAT into revenue, whether it is ever noticed is a completely different story. They are now aware that I won't do business with them going forward.

sydthebeat

Sounds like a horrible company to deal with.

But hey, they got away with playing 20% less on their bill because you caved.

mrslancaster

....

DFB-D

https://www.boards.ie/discussion/comment/120857475#Comment_120857475

There is no benefit to this other company (assuming they are conducting a Vatable activity, they just reclaim the VAT on the invoice).

Anyway, I actually think an awful lot of what your approach is naive, I deal with a lot of people who are adament they are capable of DIY tax, until they are proved wrong and cannot find the answer....btw I see errors and risks in the information you have given (tax and business).

But yes, let's leave it there!

mrslancaster

https://www.boards.ie/discussion/comment/120852158#Comment_120852158

OP said his client company didn't recognise the business name of the farm and only had the OP's name on their system.

...."They gave a story that they don't have our type of business as part of their suppliers list (work was consultancy, our business name is after our family home with the word farm in it). I am VAT registered but they just want to pay me the amount and not to the business. Do I report them to revenue. They asked me to reissue the invoice in my name not the business name and they just paid the amount without VAT"....

This is what I posted so the OPs business invoice would be linked to his name and recognised by the client's system and the vat would be paid:

...."Could you re-issue the invoice as Mr CramCycle t/a HouseNameFarm? "....

Afaik as an individual, his sole trader vat number is the same for the registered business name he is trading as.

Unless the OP had a separate limited company ie. the 'HouseNameFarm Ltd' and issued the original invoice in that name, in which case the client system may not have recognised it as being the OP's consultancy service. That wouldnt explain why the client wanted to pay the net only directly to the OP.

Please explain what evasion you mean or what the Revenue issue is whether the invoice is issued in the OP's individual name or in his registered business name, or from 'MrCram trading as HouseFarmName' when the vat number is the same?

CramCycle

https://www.boards.ie/discussion/comment/120857673#Comment_120857673

100%, there is no benefit to them, which is what is the weird thing. They are VAT registered and they could reclaim the VAT.

Happy for you to drop the errors by PM, I know there are technical errors with what I have done. Such as there is a value on the activity so whether they paid me or not, I should not have wiped the invoice and simply paid the VAT and sent them a follow up with a balance left. So this is technically fraud. On paper though, it ends up the same for me and revenue, with less hassle.

As for a business error, alas no, it would be an error to keep doing business with them in any way shape or form. I wish I had known their reputation before I started doing business with them. In hindsight, best I can think is that they were trying to have one over on me as I had made it clear while working there that I was getting busy so wouldn't be doing much more past that project. Most of their business is not local. Despite their substantially large profits per year, they are or were never going to give me much business, I won't gain any business of them as they were never going to recommend me to anyone else and the many people I am getting business from now would have been more hesitant to do so if I was associated with them so I am happy with my choices.

CramCycle

https://www.boards.ie/discussion/comment/120857845#Comment_120857845

You are right, my CRO registered name and VAT registration are the same XXXXXfarm Ltd.