'I recently started a contract through an agency. The contract was between my own company and the agency. I've been working for several weeks now, but not one invoice has yet been paid. When I spoke to the agency about it, they told me that they've been told by the Inland Revenue that they can't make payments to my own company, because it was incorporated in the Isle of Man - and that, as a result, I'll have to get an English company instead before they can pay me!'
I've read your contract, and it is clear that your company is quite properly and accurately described in it; the contract is between the agency on the one hand, and your Isle of Man company on the other; it has been signed by both parties. You started work several weeks ago; you are entitled to invoice fortnightly, and your invoices are to be paid within 7 days. 2 invoices have now been sent - the first is now 2 weeks overdue, and the second will become overdue unless paid this week.
You say you're now told by the agency that (according to them) the Inland Revenue have said that they 'can't' pay your Isle of Man company; an agency which tells you this is seriously misleading you - I do not believe that the Inland Revenue would tell any company that it could not pay another, wherever that other company happened to be registered - the Inland Revenue's function is to assess and collect tax, not to tell companies who they may and may not pay.
Provided the invoices have come from the party which entered the contract - in this case, an Isle of Man company - then there is no question of the agency not being liable to pay them, and nor is there any question of there being any legal obstacles in the way of their doing so. Unless a state of war exists between England and the Isle of Man (!!!), then there can be absolutely no lawful reason for the agency to decline or delay making payments which have fallen due under a contract it has already entered with that company.
If the agency had any valid reasons for not wishing to deal with a company incorporated in another jurisdiction, then they should have raised this at the outset, and taken it into account before entering the contract. (I'm not necessarily saying that it is legitimate for a company incorporated in one EC country to decline, as a matter of principle, to deal with a company incorporated in another EC country - I have my doubts whether it would be, but that's a separate issue.) In this case, once they have entered the contract, then they are quite clearly bound by it.
There is therefore absolutely no reason why the agency 'can't' pay your company's invoices - it's quite easy, all they have to do is to write a cheque, or pay by bank credit transfer. There is certainly no legal obstacle which might prevent an English company from paying an Isle of Man company - and it would certainly be well outside the powers of the Inland Revenue for them to tell the agency otherwise. (Assuming, of course, that the Inland Revenue did in fact say that - I have my doubts!)
You are entitled to demand that the agency immediately honour the terms of the contract it entered (ie by paying); you would be wise to make time of payment of the essence of the contract, and draw to their attention that unless payment is made within (say) the next 5 days, you may then be at liberty to terminate the contract on the grounds of their breach in failing to pay. In that event, you may also be entitled to claim damages for breach of contract.
Termination for the agency's serious breach in such circumstances would probably also operate so as to release you from any restriction in the contract which might otherwise have prevented you from dealing with the Client for a period, other than through the agency - the logic being that if the agency has acted in such a way as to make clear that it does not itself intend to be bound by the contract, then it would hardly be reasonable for the agency to expect to be able to take advantage of any specific terms in the contract which are favourable to the agency - no cherry picking! Thus if you did terminate the contract for the agency's breach, the way should be clear for you to make a fresh arrangement to work on for the Client, either direct, or through another agency.
3rd September 1999
I'd really appreciate your feedback on this FAQ - so mail me and tell me what you think of it, if it's been useful to you, or let me know of any specific problem you have where I may be able to help.
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