Contracting question
Discussion
Company A subcontracts work to companies B and C regularly, separately.
This time company A wants to draw up one invoice to cover a piece of work which can't be split apart but would be fulfilled by B and C, roughly sharing equal amounts of work.
B and C are both companies with one director who is the sole employee.
A was going to try and draw up a contract which meant equal payments would be made to B and C with both as signatories on the contract but has decided this is difficult - presumably because of what happens if the work isn't done in time as a result of one party.
They're now suggesting A would contract to B and B would in turn subcontract to C. Is this reasonable? I'm struggling to get my head around the VAT payments, B and C are both on the FRS.
This time company A wants to draw up one invoice to cover a piece of work which can't be split apart but would be fulfilled by B and C, roughly sharing equal amounts of work.
B and C are both companies with one director who is the sole employee.
A was going to try and draw up a contract which meant equal payments would be made to B and C with both as signatories on the contract but has decided this is difficult - presumably because of what happens if the work isn't done in time as a result of one party.
They're now suggesting A would contract to B and B would in turn subcontract to C. Is this reasonable? I'm struggling to get my head around the VAT payments, B and C are both on the FRS.
768 said:
They're now suggesting A would contract to B and B would in turn subcontract to C. Is this reasonable? I'm struggling to get my head around the VAT payments, B and C are both on the FRS.
Sounds completely normal to me.If A wants to be certain that B engages C to do the appropriate part of the work then A's contract with B should state, "It is a condition of this contract that B will engage C to perform xyz". [C then becomes what is knows as a Nominated Subcontractor]
As regards the VAT, it's not A's problem. It's up to B to sort out its VAT position.
The only one potentially benefitting in that situation is C, as B would still be held accountable for their performance. If they went back-to-back on contracts then they can pass down the responsibilities, however still a headache for B and they should expect a 'fee' on top of C's price for the admin.
What A initially wanted was a joint venture approach, but I can see the reluctance as they would normally be held joint and severally liable and would also need to sort out a JV agreement.
What A initially wanted was a joint venture approach, but I can see the reluctance as they would normally be held joint and severally liable and would also need to sort out a JV agreement.
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