Signs of terminal decline in a business

Warning signs of impending collapse

[Essex_boy]

A large firm ive worked with for around 5 - 6 years has suddenly stopped paying the VAT on their invoices, while claiming that it was an error the situation has been ongooing now for sometime and I understand Im not the only affected by this move.

Having seen dozens of banks collapse this year I can see no reason why they wouldnt to, their main line of work is also construction related.

So is this a first sign of problems or am I paranoid ?

Any thing else I should watch for ?

[Dabrowski]

Not sure what to say. If you are both VAT registered, they can claim the VAT back that they'd pay you anyway.

I think the first sign is the chairman taking a big bonus for his good work.

[engine]

I'm also not sure what to say. With VAT, there's no way round it.

I'd suggest making a call to your VAT office.

[cornwall]

Effectively they have not stopped paying VAT, what they have done is taken a discount of 17.5%

In other words you are still liable for VAT on what they paid you.

If you billed the £100 plus vat, they should have paid you £117.50. But have only paid you £100.

You are liable for 17.5% of the £100 they paid you and legally have to pay that to vat-man, the exact calculation being that the £100 they did pay is split £14.89 for vat-man and £85.11 for you.

Vat-man basically is not interested in whether they have neglected to pay your original invoice or not, he wants his cut of what they did pay

[Dabrowski]

Assuming it's a lot of money you're talking about....if it all goes south and the refuse to pay the balance, issue a credit note for the balance.

That way you won't be liable for the VAT on the unpaid amount.

[Essex_boy]

Yes thats correct and im having to pay the money myself, my concern is that you have to have the VAT in the bank to pay it in the first place. I suspect they are low on funds hence the drop in payment levels.

[cornwall]

That way you won't be liable for the VAT on the unpaid amount.

That's is correct, but as you say only applies to the unpaid amount

You are still liable for the vat on what they have paid. With my £100 + vat example above, you are liable for the vat on the £100 you were paid, the credit note only gets you over having to pay vat on the £17.50 that they short changed you on (that is about £2.60)

Certainly worth avoiding the disagreeable need to pay vat on money you never got, but you will still have to pay vat on the £100 you did get.

[g1smd]

The good news is that if you ever get paid the rest, then 85.11% of it is yours.

[cornwall]

If they have a cash flow problem that is not (quite) terminal they may be waiting till the end of their vat quarter to pay vat to their suppliers, that way they could get the money back before they have to pay it out.

[Essex_boy]

Just received payment in full, Ill just have to keep watching them

[wheel]

Gross up their invoices by 17.5% :).