Harry Monk:
If you’ve invoiced the agency for (say) £1,000 and they’ve paid you £1,200 then you won’t have a problem with the Vatman. At some point HMRC will notice that VAT has been paid but not received by them and at this point they will contact the agency and ask them how this can be.The agency will be liable for the missing VAT. The agency can claim back the overpayment from your company but technically you could close down the company and there wouldn’t be any comeback for you about it.
Thanks, Harry.