Client won't pay me, cites VAT no. req

Robrt

Hi,

It's a long story, but I'll try and keep it as short as possible while explaining the details of my problem.

I worked in another EU member state for ~ 2 years. After deciding I wanted to move back to Ireland, the company I worked for indicated they really wanted me to continue working for them.
As it'd be impossible for me to work in Ireland and continue receiving my steady employment income from them and pay my taxes in the other EU-member state, we agreed I would found a (Limited) company and bill them for work performed.

This arrangement was started in April and has worked flawlessly. Except for one thing.
The whole month of April was full with deadlines, flying back and forth between the other EU member state and Ireland (and being stuck somewhere else due to the ash cloud).
As such, I didn't have time to register for tax (TR2) in April.

At the end of April, I sent my first invoice. After some back and forth, they told me they'd refuse paying the invoice and indicated this was because I wasn't yet VAT registered.
Citing EU regulations, "it'd be illegal to pay without a VAT no", etc.

This put a bit of a stretch on my personal budget (I'm a new company in only my 1st month of business, after all!), but I went ahead with it and filed my TR2 registration, marked urgent.
Unfortunately it's now the 31st of May, and I still haven't received a tax registration no. back from Revenue.

Additionally, I've done some checking (I would've used an accountant if I had the money for one, but I can barely pay my groceries as it is..), and as far as I can tell there is no requirement for me to be VAT registered (yet).

I am:
- A Limited company
- Working in the IT services field
- Place of work is Ireland.
- Work is carried out over the internet for a client in another EU member-state

According to New Intra-Community VAT Rules on Place of Supply for Services, which states: "For supplies of Business to Business (B2B) services, the place of taxation is the place where the recipient is established (reverse charge)." [1]
And additionally: "Service suppliers in the State must not charge VAT when supplying services to a business customer established outside Ireland." [2]

Now, as far as I can make out from this, it appears I am not required to be VAT registered yet and even if I would be, I would still not charge VAT (altho I *would* then have to file quarterly VIES returns). Plus, seeing as the VAT is reverse charged, my client should pay the local VAT over this invoice to their Tax Office who'll then balance it out with their tax credits/debits at the fiscal year end.

I will pass the €37,500 barrier this year, but I don't see that as a problem for paying my first 1 - 2 invoice(s)?
(April invoice is around €7k and May invoice around €8k)

Am I right in seeing there isn't really anything against them paying me, except for perhaps their internal company regulations?
* I do not charge VAT
* I do not have to charge VAT (zero rating)

This isn't really a right/wrong thing for me; I just want to do my work and get my invoice(s) paid; if that means I was wrong, that's fine as well.

It's a bit of a mess really and I wish I'd checked it all out beforehand, but what can you do.. :-/

antoinolachtnai

This is business, it often happens. The paperwork has to be lined up when working with big companies. In a lot of countries, you do need a 'tax identifier' or 'fiscal identifier' to get any payment at all. This is not quite the same as a VAT number, but in practice, it is more or less the same thing.

First, would you try ringing the tax office that deals with the registrations? I am sure they will help you if they can, and expediting a VAT registration might be something they could do.

Second, I'd say get an accountant as soon as you can. If you are introduced by somebody, I'm sure they'll extend you a month's credit. The accounting and stuff is complicated enough that it will be worth your while.

Third, if you are really stuck for cash, you might be able to get the bank to give you an overdraft on the strength of a personal guarantee and a letter from the client company explaining that they have received and accepted your invoice but are waiting for the paperwork to come through before they can make payment.

In terms of the rights and the wrongs of it, you are probably right on the law, but you probably aren't going to succeed in convincing the client company, at least not without damaging the relationship.

Good luck with your new business!

AndyJB

Hi,
Had very similar prob' when I started contracting many years ago. As the last poster suggested, do phone your local tax office and explain your problem. Tell them that you're broke and can't get paid until you have your VAT reg.

How good is the relationship with your client? Ask if they could make a part payment while your waiting on the VAT reg to come through to cover project expenses. Failing that, ask for a letter confirming your contract with them for your bank manager.

As an IT contractor you're better off being VAT registered. As you're working from home (I presume) make sure you reclaim phone line, broadband, mobile expenses from your Ltd company. Don't forget your company can also claim depreciation and VAT on any hardware that it bought for you to use for work.

As you've setup a ltd co you will be an employee and will have PRSI etc to pay, as well as annual director returns to make.

Speak with an accountant asap. They don't usually charge until they've done accounts and he/she will tell you what to do about your salary/prsi etc etc.

In the mean time just keep Excel work sheets with income and expenses.

Best of luck.

Robrt

Hi both,

Thanks for your responses! Yeah, I agree, that's business, but it's a strange situation to be in in your first month. :P
I just got a reply back from someone at Revenue and the registration has been processed and is fully active. Hooray!

So, all's well in the end. Thanks again, and I'll definitely be taking the advice of seeking an accountant.
*pops another aspirin after reading through tax law late last night*