Welcome to our first newsletter!
In this edition we will be giving you an update from HMRC on the current mileage rates and auto enrollment rates, a list of all our upcoming events from the year, information on how you can protect your business from £10 a month and an interesting blog from Michael Stewart on the dangers of accepting payments from third parties.
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Company A has a contract with Company B under which B owes A £10,000. Company C agrees to pay the £10,000 to A.
What could possibly go wrong? Plenty!
A may lose contractual rights against B. A should not accept payment from C without communicating a proviso to both B and C that A’s rights against B are unaffected and that C is acting as agent of B.
Do the directors of C have authority to make the payment? Generally yes unless A knows C is not acting in good faith.
Is C a UK Company? If not an opinion from a local lawyer where the foreign company is based will be prudent to confirm C can properly make the payment.
Could the transaction be set aside as a transaction at an undervalue? Generally if C goes into administration of liquidation within two years the payment may be challenged as a transaction at an undervalue where C was unable to pay its debts at the time of payment or if C became unable to pay its debts as a result. Consider obtaining a certificate of solvency from the directors of C.
Are there tax issues? There may be, for example only B as the person to whom the supply was made can make a valid VAT input claim. A should not therefore issue a VAT invoice to C.
What about money laundering? A should satisfy itself that C is making the payment for a legitimate reason and consider asking for proof of where the funds to make the payment originated.
What if C agrees to make a payment to A of only £5,000 of the £10,000 due? A may inadvertently discharge the whole debt and be unable to recover the balance and should therefore make it clear to both B and C that the payment is accepted on account and will not discharge the obligation to pay the balance which remains due.
This blog was written by: Michael Stewart
DISCLAIMER: Please note that this post sets out the general position under the general law. It should not be acted upon in any specific circumstances without taking specific legal advice as to those circumstances. Also, it should not be relied upon, acted upon or treated as a substitute for specific advice relevant to particular circumstances. If you do require specific advice please contact us for assistance.
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