Bad debt. Worth pursuing?

[Salvadore]

As a favour to a friend, I took on a client who is a friend of his son (I’m an employment law consultant) without insisting on the normal advance retainer. The guy had a reasonably strong case and I was confident of a positive outcome at the WRC.

I sent him an invoice a couple of months ago in respect of some initial work. Time passed without payment and ge ultimately decided not to proceed with his claim. He has acknowledged that he owes me but has so far failed to pay.

The amount involved isn’t huge (about €450) but I’m annoyed with his behaviour and that he thinks this is acceptable. I’ve also had to pay the associated VAT.

Any advice on how to pursue? Is it worth getting a debt collection agency involved? Small amount but it’s the principle involved.

 

[T McGibney]

I’ve also had to pay the associated VAT.

How and why?

You're hardly turning €2m a year?

PS

I'd write off the €450. Life is too short for "the principle".

 

[Brendan Burgess]

The amount involved isn’t huge (about €450) but I’m annoyed with his behaviour and that he thinks this is acceptable. I’ve also had to pay the associated VAT.

If you write it off, you can reverse the VAT. So VAT is not an issue.

 

[Brendan Burgess]

Any advice on how to pursue?

It's annoying. But call him and ask him to pay it.

Explain that if he is having difficulty, he can pay it in instalments.

It is absolutely not worth getting a debt collector or solicitor involved. They are unlikely to get paid either.

 

[Salvadore]

How and why?

Correct me if I’m wrong but according to Revenue vat is payable from when the invoice issued rather than when it was paid.

And what’s the significance of the €2m?

 

[T McGibney]

according to Revenue vat is payable from when the invoice issued rather than when it was paid.

Who may opt for the moneys received basis?​

You may apply to account for Value-Added Tax (VAT) in this way if you are a VAT registered person:

• whose turnover does not exceed, or is not likely to exceed, €2,000,000 in any continuous period of 12 months
• or
• whose supplies (at least 90%), are made to customers not entitled to claim a full deduction of VAT or who are unregistered for VAT.

 

[JamesBM]

Who may opt for the moneys received basis?

This page explains who may opt for the moneys received basis of accounting for VAT

www.revenue.ie

You can elect to pay VAT on a "moneys received basis" if your turnover is less than €2m

 

[Brendan Burgess]

Correct me if I’m wrong but according to Revenue vat is payable from when the invoice issued rather than when it was paid.

You are correct.
But if you process a credit note, it will effectively give you back the VAT.
You don't send the Credit Note to your client.
If he does actually pay it, then you put through a new invoice.

 

[Salvadore]

You can elect to pay VAT on a "moneys received basis" if your turnover is less than €2m

Didn’t realise that, thanks. Wasn’t the steer I got from the Revenue official I spoke with.

 

[T McGibney]

Wasn’t the steer I got from the Revenue official I spoke with.

You shouldn't really depending on those people for advice on anything. Google would have given you a correct steer in a few minutes.

 

[JoeRoberts]

Keep chasing it. Offer a payment plan as well. Then start adding interest.