Received an out of court settlement but got nothing in writing, is that normal?

St1mpMeister

My company was owed money for 2 unpaid invoices, and we eventually received a settlement which covered 100% of the invoices, plus some extra to cover interest.

I never received anything in writing beyond a text message from my solicitor saying they offered X amount.

Is that normal? Do you not receive anything official like a settlement agreement? Need it for tax purposes.

GerardKeating

https://www.boards.ie/discussion/2058369116/received-an-out-of-court-settlement-but-got-nothing-in-writing-is-that-normal

Did you actually get the money, and what does your accountant think ?

Lenar3556

https://www.boards.ie/discussion/2058369116/received-an-out-of-court-settlement-but-got-nothing-in-writing-is-that-normal

https://www.boards.ie/discussion/2058369116/received-an-out-of-court-settlement-but-got-nothing-in-writing-is-that-normal

Why do you need it for tax purposes? The monies received are payment for the two invoices.

Rows Grower

Your bills were paid and presumably so were your solicitors by whoever owed you money. Did you ask your solicitor?

Claw Hammer

The solicitorsa bill is tax deductible.

The solicitors office is oblige to maintain an accounting ledger.

The o/p should have been given a statement of account showing how much the defendants paid and how much the solicitor took for his fees.

St1mpMeister

Just to clarify it was payment for invoices, but a little extra, not the full legal fees.

e.g. say I was owed 20,000 including VAT… and I received 23,000 as a settlement

Do I not need to show where the "3,000" came from for auditing purposes, or is it just viewed as partial repayment of legal fees?

Then there's the question of whether VAT is owed on the 3,000 …VAT on the 20,000 has to be paid as that's what's invoiced… but nothing is written regarding the 3,000 example

Lenar3556

The €3000 is income, and VAT is returnable to revenue at the standard rate (23%).

The legal fees are a separate expense, and are treated the same as any other business expense (light & heat, maintenance, repairs, bin charges etc.)

GerardKeating

https://www.boards.ie/discussion/comment/122631154#Comment_122631154

Do what ever your acocunt says, his advice is better than online advice, and he is the one that need to sign off your books at the end of the year.

Lenar3556

https://www.boards.ie/discussion/comment/122632405#Comment_122632405

He may have an accountant to prepare them. He must sign off on them himself.

St1mpMeister

So back to my original query, it's standard to just receive an email saying "They've offered a settlement of X. Here's my final invoice, send me your bank details to receive settlement payment" (essentially)

Nothing needs to be signed saying the case I brought forward is now settled etc?

Unusual, but perhaps that's the norm in the legal world.

POBox19

The company received the payment for the two invoices and compensation for the late payment. You do not pay vat on the interest received. There is nothing to sign. The solicitor has dealt with the debtor and sent in their final invoice for their services. The case is closed. QED.

I've had to do this a few times. The rules and rates etc… are set out on this EU page:

https://europa.eu/youreurope/business/finance-funding/making-receiving-payments/late-payment/index_en.htm

St1mpMeister

heh.. interesting, the interest owed is far above what I received

So do I deduct the interest due from the final settlement and pay VAT on the rest?

This is exactly why I wanted it in writing so that it's spelled out how much interest is included, and what portion is repaying the original invoices

POBox19

Happy days!

You've received interest and compensation for recovery costs, there is no vat charged on those. If you charged vat on the original invoices you'll have to account for that in your returns. The solicitors bill will have a vat element to be treated like any other expense. Your auditor would be a good place for professional advice about the matter.

St1mpMeister

I was discussing this with my accountant last week as I was aware interest was due, but didn't realise how much until I used your calculator there.

So we had decided that the invoices due would be deducted from the settlement and VAT paid on those, then the remainder of the settlement would be to cover interest due.

But using that calculator I see a LOT more interest than I originally envisioned is due, so I assume we'll need to add that as a loss in the accounts. I'll see what he says.

Claw Hammer

https://www.boards.ie/discussion/comment/122635178#Comment_122635178

You accepted a settlemt offer. You did not lose the higher interest if the matter had gone to a court hearing and you had been awarded more interest.