Small court claim - and company sold

[Valentina]

My partner and I are building our own house. Only after sorting out documents for the vat refund for new build I have realised that the building services should be zero rate. At this point we have already paid 3.6k vat to the building company which subcontracted our build to another building company. We inform our contractor about this error in Jan and he said he would sorted. After many reminders and after receiving replies from the contractor such as"you are at the bottom of my list" and after offering repayment in installments we decided to start a small court claim toward the company and the director. The company (based in Kent) never issue a credit not with vat and a new invoice with zero rate as requested so he never fixed its books. Once the court claim was sent the director admitted the amount he owed to us and promised to repay us in 4 installments. We accepted. He made his first payment on 31st at 6pm on his very last day available after sending various email threatening to instruct ccj. Two days ago the director informed us that the company was sold to this new director (based in Bury) and we have been instructed to liaise with the new director only. We emailed the new director and didn't received any reply. I would like to know if we still claim our money even though the company has been sold? What If the new director doesn't reply? We only have a Gmail account email ...also this new director has been appointed to other 7 companies in the last 2 months...and it seems they are all companies on the verge of dissolving.... Please advise if we still have a change to recover our money. The company is scamming the system and HMRC....

Satisfied custo

[Valentina]

Our contractor said that the subcontractor applied the vat to him and sued the subcontractors. We have the proof that the subcontractor didn't charge the vat...therefore the vat paid by us is definitely the margin for the contractor. Basically is up to no good...and now after taking him to court he found a way to get out of it....

[ToughButterCup]

9 hours ago, Valentina said:

.... Please advise if we still have a chan(c)e to recover our money....

 

I sympathise greatly with you.

We are not experts in VAT and self-building. Please read the comprehensive post written by @newhome here.

That whole section of this site bears close reading. My instinct says you have a long fight on your hands.

[ProDave]

So they have charged you VAT when it should have been zero rated.

 

Rather than pursue through courts, contac HMRC VAT department.  Now if they had charged you VAT but not passed it on the HMRC that would get interesting....

 

Just a thought. 

[saveasteading]

Debts are passed to any new owner. 

The last thing anyone wants is the vat inspector. Even when a business is squeaky clean they take up a lot of time.

I had one for 3 days. All he wanted was suppliers invoices and payments. They then go there to see if there is a differeng version of the vat. Apparently vat is seen as an easy aid to cash flow.....just pay somd fof now.

 

IF you are in the right, big if, then PD maybe has the answer.  You might politely  just tell the other party that you will ask the vat man to check it out. 

[Valentina]

Thank you all. We have started the investigation with HMRC end of feb and beginning of march...as also the invoices we received where numbered 01/02/03/04 so it seems that from July to october( last invoice received and end of job) we were the only customer....the subcontractor confirmed that they have not applied the vat to our contractor so we don't really understand....we had to go to court as advised by HMRC ..as they couldn't do much for us....we suggested payment in installments, gave him a time frame....after all this we went to court...

Now the new director is not replying to our emails....so I am worried that the money are lost...can i instruct ccj to the new director in case he doesn't pay by 30 April ?

[saveasteading]

The new director owns the debt.

Notice before action perhaps?

[Temp]

May have to get the court to amend any order.

[Adsibob]

@Valentina can you clarify a few things please:

 

16 hours ago, Valentina said:

Once the court claim was sent the director admitted the amount he owed to us and promised to repay us in 4 installments.

How was this admission recorded? Did the defendant company tick the box on the claim form that says they "admit" the claim. Or was the admission down outside of court documents? If the defendant admitted the claim as its formal response to the claim, then you would have the right to a Court judgment against the defendant (see Civil Procedure Rule 14.1(4) https://www.justice.gov.uk/courts/procedure-rules/civil/rules/part14). That is important, because you could then convert the admission into an actual court judgment, and that will speed up the process of enforcing the Court judgment, rather than having to start a new claim.

 

16 hours ago, Valentina said:

 

We accepted. He made his first payment on 31st at 6pm on his very last day available after sending various email threatening to instruct ccj.

It is helpful that a first payment was made, as it evidences that at least initially the defendant thought the admission was binding.

 

Ultimately, just because a company changes hands, does not change the company's liability to you. The director of a company is just it's agent and the shareholder is just its owner. But the company has separate legal personality, and this is not to be confused with the legal personality of the director or the agent. The liability is with the company, not the director.

16 hours ago, Valentina said:

We emailed the new director and didn't received any reply. I would like to know if we still claim our money even though the company has been sold? What If the new director doesn't reply? We only have a Gmail account email

As the liability is with the company, not the director, it doesn't matter if you have up to date contact details of the director or not. You should communicate directly with the company in any case, by writing to the company's registered address which you can find here: https://find-and-update.company-information.service.gov.uk/

 

 

[andyscotland]

14 hours ago, ProDave said:

So they have charged you VAT when it should have been zero rated.

 

Rather than pursue through courts, contac HMRC VAT department.  Now if they had charged you VAT but not passed it on the HMRC that would get interesting....

 

Just a thought. 

 

If they have standard rated the invoice but declared it as 0% on the VAT return and pocketed the difference, that would be fraud and HMRC would definitely be interested.

 

But it is much more likely that the VAT shown on the invoice went on the next VAT return and was paid over to HMRC. These days the vast majority of traders are using book-keeping software that does that automatically. You can't just "make a mistake adding it up" like the old days, you'd have to manually adjust the numbers on the computer in a way that leaves a trail and means it's easy to get caught.

 

If that's happened then they have charged you more VAT than they should have, but they have also paid HMRC more VAT than they should have.

 

You're out of pocket, the trader has not gained anything, and HMRC have your money. Sadly HMRC are unlikely to spend much time trying to give it back (and their powers are limited : e.g. they can't charge a penalty to someone for overcharging VAT).

 

Which, as an aside, is why I think it's pretty unfair HMRC won't allow things like this for the self-build scheme - in the majority of cases they will have your money or be about to get it.

 

It's also worth saying that just because a subcontractor hasn't charged VAT doesn't automatically mean the contractor shouldn't charge VAT when they charge it on.

 

Each step in the chain is a new transaction for VAT purposes, and you can get situations where a supply is 0% rated between suppliers but then 20% rated to the final customer. Just as you can get cases where it's 20% rated between suppliers but 0% rated to the final customer.

 

When that happens then - so long as everyone is being honest on their VAT return - none of the traders gain anything, all the "profit" on difference between amount paid and amount charged ends up with HMRC.

 

All you can really do is pursue the action against the company, via the new director, and get them to issue the credit note and correct invoice and your refund.

 

If the new director is not familiar with the history, it might be worth making sure they understand that all they have to do is correct the invoice and reclaim it on their next VAT return: they don't have to pay out of their own pocket. Some people struggle to grasp that!

 

This does all assume that the company is a limited company and is still trading under the same VAT registration as before. If not then it will be more complex as they won't be able to correct a different entity's VAT returns.

[andyscotland]

I should have said of course the other caveat is if the company has done all the paperwork honestly but hasn't actually paid the VAT bill due to e.g. lack of funds/cashflow then that is also tricky. HMRC will be pursuing that but again they will be interested in getting the money they think they're due, not in helping/forcing the trader to reduce the amount.

[newhome]

A company can go back just over 4 years (to the beginning of the earliest tax year) to correct VAT. If the VAT originally charged was paid to HMRC they should be able issue a corrected invoice and adjust it in their VAT return. They won’t be paying you money out of their own pocket per se so it should be no biggy for them albeit a bit of hassle for them. If they didn’t pay the original VAT to HMRC then it’s fraud. 
 

Note that if a company deregisters for VAT or is dissolved then they cannot correct incorrectly charged VAT via a VAT return so you won’t have much joy if this is the case. 

[Valentina]

On 20/04/2023 at 14:31, Adsibob said:

@Valentina can you clarify a few things please:

 

How was this admission recorded? Did the defendant company tick the box on the claim form that says they "admit" the claim. Or was the admission down outside of court documents? If the defendant admitted the claim as its formal response to the claim, then you would have the right to a Court judgment against the defendant (see Civil Procedure Rule 14.1(4) https://www.justice.gov.uk/courts/procedure-rules/civil/rules/part14). That is important, because you could then convert the admission into an actual court judgment, and that will speed up the process of enforcing the Court judgment, rather than having to start a new claim.

 

It is helpful that a first payment was made, as it evidences that at least initially the defendant thought the admission was binding.

 

Ultimately, just because a company changes hands, does not change the company's liability to you. The director of a company is just it's agent and the shareholder is just its owner. But the company has separate legal personality, and this is not to be confused with the legal personality of the director or the agent. The liability is with the company, not the director.

As the liability is with the company, not the director, it doesn't matter if you have up to date contact details of the director or not. You should communicate directly with the company in any case, by writing to the company's registered address which you can find here: https://find-and-update.company-information.service.gov.uk/

 

 

Thank you very much.i will send a letter to the new registered address. The old director has now opened a new company in London...and we found out that he owns money to other people..there some dodgy stuff going on... definitely he has not rectified his books either....

[Adsibob]

22 hours ago, Valentina said:

Thank you very much.i will send a letter to the new registered address. The old director has now opened a new company in London...and we found out that he owns money to other people..there some dodgy stuff going on... definitely he has not rectified his books either....

You keep mixing legal personalities here. The director and the company of which he was a director are separate legal persons. He can only be liable for the debts of the company in certain limited circumstances, such as if he committed wrongful trading, by allowing or authorising the company to continue to trade, after he knew or should have known that it was insolvent. It’sa fairly complicated areas of law, but worth reading up on before going off on some crusade against the director, when he actually might not have any liability to you because your contract was with the company.

Edited April 26, 2023 by Adsibob

[Valentina]

On 26/04/2023 at 19:54, Adsibob said:

You keep mixing legal personalities here. The director and the company of which he was a director are separate legal persons. He can only be liable for the debts of the company in certain limited circumstances, such as if he committed wrongful trading, by allowing or authorising the company to continue to trade, after he knew or should have known that it was insolvent. It’sa fairly complicated areas of law, but worth reading up on before going off on some crusade against the director, when he actually might not have any liability to you because your contract was with the company.

Thank you but this is a scam. I have sent a recorded letter to the new company address and noone is there... How is it possible that there are 17 companies registered to that address and noone is there.... We have not received any reply from the new director nor any payment and we have no other way to contact him. I won't be surprised if the new director doesn't even exist and it's a stolen name. I will persue this and report the company to companies house

[SteamyTea]

16 minutes ago, Valentina said:

Thank you but this is a scam

A limited company has limited liability, not really a scam.

[saveasteading]

2 hours ago, Valentina said:

How is it possible that there are 17 companies registered to that address and noone is there.... 

Perfectly normal. Many companies will use their accountants' address as the registered office.

They will not normally open letters but forward them.

Someone is probably there, but contacting may be tricky.

There are dodgy registered addresses too,  but don't assume they are all bad.

[Adsibob]

The ratio of companies to humans in England and Wales is about 1:12.

 

In the BVI it’s 32:1.

 

This is not because there are more addresses in the BVI!

Edited May 1, 2023 by Adsibob

[SteamyTea]

14 minutes ago, Adsibob said:

This is not because there are more addresses in the BVI

Are there more virgins

[Adsibob]

3 minutes ago, SteamyTea said:

Are there more virgins

Virgin companies? Yes, the availability is endless.

[SteamyTea]

11 minutes ago, Adsibob said:

the availability is endless

That's verging on the ridiculous.