The perils of being self-employed.

One of my clients has just gone into liquidation - owing me £2,700 in fees and the VAT I have to pay the VAT nonetheless and then reclaim when the liquidator sorts it out, so I'm actually well out of pocket by about £500. Instructions concerned a contracted-out lease of a unit in a shopping centre here in Shrewsbury, with a licence to underlet, licence for alterations, and a rent deposit deed.

At least I didn't hand over the title documents and I'm claiming a lien on them until I'm paid. Mind, when the rent deposit expires (6 months) the landlord will forfeit the lease, so they're pretty well worthless unless the liquidator can find an assignee in the meantime.

Anne was chasing payment last week and the client lied to her. No cheque, so she walked up to the centre today and saw that the shop was closed. I called him and confronted him with his own dishonesty. Surprise, he didn't like it. Squirmed like hell in fact. Lying toad. I would have had far more respect if he had told the truth.

B@st@rd

So I'm £3,300 down. I still have to pay my staff, rent, and all the rest of it.

But there's nothing I can do about it except wait for the liquidator to sift through the mess and file a complaint about the directors' conduct.

I've learned a very painful lesson.

In future I won't accept instructions from new start ups without £1,000 on account, and I will insist on monthly billing.

If they haven't got the money then I won't do the work.

Sorry to hear about that, Ed. It's stuff like that that can cause honest people like you (even though you're a lawyer! ) to go out of business.

My company does a "payment plan" with each new contract we sign, the client will have to pay something between 25% to 40% (depending on the project) up front before we even start working, then some more with each reached milestone until everything is done and paid for. Could be an idea for you?

And breathe....

Firstly, are you cash accounting or paying VAT on your invoices? If the first, then you wont pay the VAT over because you only pay when you get paid. If the latter and you've raised an invoice then yes you have to pay it to HMRC.

However, are you aware of the bad debt rules? Its not about claiming it back when the liquidator sorts out the mess. You can claim it back after 6 months regardless of whether the liquidator has sorted it.

If you receive part payment, then you reclaim after 6 months the element that you havent been paid for. PN 700/18 refers.

Not a lot of help, but may be something for you to bear in mind in 6 months time to at least get the VAT back. Alternatively, have you considered cash accounting or flat rate scheme?

thats bad news Ed, friday the 13th strikes again

[embee]

Yep, can be a big hit. Sorry to hear about it.

I never ever take on any work requiring personal outlay of more than 2 digit amounts without payment up front for it, and then only for regular customers I trust. One bad debt can wipe out the profit from several jobs, so you end up working for weeks just to break even.

There are certain sectors of the community I simply won't work for, though for reasons of PC I'm not going to identify them. I've spoken to too many self-employed people who have been bitten badly by them and I'm not going to join the ranks. That's the benefit of self-employment, by definition you are entitled to pick and choose what work you do and don't have to justify it to anyone.

Originally Posted by embee

Yep, can be a big hit. Sorry to hear about it.

I never ever take on any work requiring personal outlay of more than 2 digit amounts without payment up front for it, and then only for regular customers I trust. One bad debt can wipe out the profit from several jobs, so you end up working for weeks just to break even.

There are certain sectors of the community I simply won't work for, though for reasons of PC I'm not going to identify them. I've spoken to too many self-employed people who have been bitten badly by them and I'm not going to join the ranks. That's the benefit of self-employment, by definition you are entitled to pick and choose what work you do and don't have to justify it to anyone.

Oh I have learned. A very hard lesson. No business start ups without £1K on account. Don't like it? Go elsewhere.