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bigduckontax
bigduckontax, Accountant
Category: Tax
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A client of ours has just found out that they had been paying

Customer Question

A client of ours has just found out that they had been paying us vat on one particular job when it shouldn't have. We have several jobs with the same client. They have just told me that they are going to deduct the overpayment from a payment we were supposed to be paid next Monday. The payments due are for other jobs nothing to do with the one they overpaid on. Can they do that ?
Surely they should at least give us the chance to come up with some sort of repayment schedule. If they deduct the Vat monies I doubt I can pay my suppliers next week
Submitted: 8 months ago.
Category: Tax
Expert:  bigduckontax replied 8 months ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. Firstly, did your organisation issue a VAT invoice for that work? Secondly is the client actually correct and the service you supplied not standard rated? Now if both these statements are right then you will have to issue revised invoices for your work and at zero rate VAT. This will leave you owing the tax you paid to HMRC to them. In the longer term, ie quarterly, you put the new invoices through and cancel the old ones thus you will have overpaid VAT to HMRC and will recover it automatically at the end of the quarter. Your client is perfectly entitled to correct this error by underpaying your organisation for future works. You thus may be faced with a cash flow situation for a maximum of three months. I would suggest that this is best handled by a short term bank overdraft which, in view of the short time frame involved, should be relatively easy. I agree that it would be more polite to suggest a repayment schedule more manageable for your firm, but there is no legal ability to enforce such a course of action. I am so sorry to have to rain on your parade.

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