VAT reclaim services - underpaid referrals

The Client

A company providing referrals for VAT reclaim services.

Value of Dispute

£60,000 – £120,000

The Commercial Dispute

Our client (the “Claimant”) had a contract from 2013 onwards for sourcing and referring clients to a third party for VAT reclaim services (the “Defendant”). The claimant was paid by way of commission payments, which were calculated in accordance with the contract.

However, a dispute arose about how the contract should be interpreted after the claimant by chance found discrepancies between the settlement information reported to him and to the clients. 

After investigating the matter with further clients, the claimant suspected he had been underpaid by the defendant on a number of engagements over a period of 3-4 years, triggering the VAT reclaim dispute.

How Escalate Resolved – Services Used

Escalate agreed to fund the Claimant’s case, and issued court proceedings after we were unable to come to any agreement with the Defendant. We argued that the contract entitled our client to commission calculated as a percentage. This percentage was measured against the fee payable by the client to the Defendant following a successful VAT reclaim, which in turn was based on a set percentage of the total global VAT recovery.

In its defence, the Defendant said that the fee payable by the end-client, and therefore the commission payable to the Claimant, would only be determined once their own costs for providing VAT services had been accounted for. This would have meant significantly lower commissions for the Claimant, with the Defendant arguing that the Claimant had already been properly compensated for all of their referrals. 

Escalate made numerous offers to the Defendant which were ignored but eventually, a mediation was arranged following the first case management conference. A settlement was not reached at the mediation, but the parties continued to negotiate and prior to the exchange of witness statements, Escalate were able to agree a £115,000 ‘costs inclusive’ settlement for the Claimant.