Sargent's Solutions

Alan Sargent advises on how to handle a customer that wants its contractor to agree to payment practices which could land the contractor in court.

Alan Sargent
Alan Sargent

Q  We run a small garden maintenance business. One of our largest private customers wants us to change our invoices, taking off any mention of gardening, but invoicing for "office cleaning" at his office so that he can pay by company cheque. What can we do? We do not want to lose the business, but are not willing to cheat the taxman.

A  Unfortunately, this is not a new problem. For as long as I can remember, certain clients seem to think it quite acceptable to coerce small companies into evading tax, either by false documentation or cash payments. This attitude is most annoying, because they would never have the nerve to make such suggestions to large firms — only those they deem to be malleable and unwilling to lose the trade.

I know that in your case, you took advice and cancelled your arrangement with the person involved. No doubt he will carry on until he finds someone who is willing to help with his fraud.

Be in no doubt — you were being asked to become complicit in an illegal process, one that could have landed both parties in court. As the contractor, and therefore an entity that HM Customs and Excise could exercise greater pressure over than a private individual, you could be forced into administration simply by having your books, files, computers and so on seized as evidence, making it nigh on impossible to continue in business while it compiled a case against you.

Consumer Rights Bill

A new system is being currently promoted by the Coalition Government — one that has many flaws at present, yet will probably still become law. It is known as the Consumer Rights Bill. The bill ostensibly protects the public from unscrupulous traders, but I think it would benefit landscapers and garden contractors if we take the opportunity to present our own version, irrespective of anything the Government comes up with.

This bill seems to automatically assume that traders are out to cheat their customers, recommending that all conversations are recorded on mobile telephones for future use in case of dispute. Quite how they expect details of materials and colours to be filed for posterity, I have no idea!

Protect yourself

By following some simple rules, you can reduce any chance of misunderstandings between yourself and a potential customer. If you work to a system that is open and transparent from the moment of introduction to final completion of works, you can ensure everything runs smoothly and legally.

Introduce your company to the potential client with a written document they can keep. This should clearly show your name and address, contact details plus all other relevant information, including insurer’s name and policy numbers/dates/values, bankers, including electronic transfer details, and accountants/financial advisers. This ensures there is no doubt that you are a professional company.

All and any materials that are nominated and selected for use on the project should be scheduled, including the name of the manufacturer, catalogue reference number if applicable, colour as described by the supplier, plus a written document within that schedule that clearly states that the client has seen and approved those materials, in both wet and dry condition. (This avoids any question of colour change due to weather conditions.) This schedule, together with samples, signed in felt tip by both parties, should be left on site as a "products library".

Try to work to plans or dimensioned documents. If you are presented with drawings that will form part of any contract agreed, note any identifying dates and numbers — including the latest dates or numbers on any alterations — and ensure that somewhere in your contract you specify amounts and sizes that are included, clearly showing specific measurements in square metres, for instance, rather than just a mention of an area. You may also wish to include a price per square metre for any additional works in case of any miscalculation.

If the client insists that the works must be completed by a certain date — this usually indicates that they have experienced problems with tardy contractors in the past — be wary of committing to any firm date without setting out your clear rules, including following a strict timetable and having the client working in close co-operation with you. (Frequently, this "critical date" is not genuine — there is no "wedding"or "party", it is just a means to ensure that the contractor performs in a timely manner.)

If the project is accepted, and a start date agreed, and you feel committed to the job, and the client suddenly announces that the work must be "cash, no VAT" — which happens far more regularly than many would believe — you have to make a decision: to cancel or continue. If you are prepared to take a large drop in income/profits, that is your decision. My strong advice is to walk away.

You know the project is going to be trouble all the way through. Once you have capitulated by accepting cash, no VAT, then everything else — all contracts, product libraries, and so on — becomes meaningless, because you cannot refer to them.

Finally, if you are asked "do you accept cash?", the answer could be: "Yes, but I charge an extra £25 per payment to cover the costs of going to the bank with the money". They will then happily pay by electronic transfer of funds.

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