Forum

• # 102889
• Mon 24 Nov 2014 05:03 PM

Hi

I have just taken over the books for a Christmas shop. They are using a manual system using cash accounting for VAT. They are just using a cash book and VAT book, Invoices are entered in the cash book when they are paid.

My question is: I am given a takings sheet showing credit card and cash totals for each day. The cash isn't always banked as floats are needed and casual staff and petty cash paid. In the past when a bulk amount has been banked the VAT has been calculated on this figure not on the actual takings. Is this correct? Should I calculate VAT from takings sheet and deduct the VAT already recorded from banking?

Hope this is clear!

Thanks.

J

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• # 102891
• Mon 24 Nov 2014 05:14 PM

Hi Jackie,

Vat cash accounting sheme:

Account for Vat when you pay suppliers

Account for Vat when customers pay you - therefore when they receive the cash/card receipts from customers the vat is accounted for at the time of sale not when they decide to bank some or all of it!

What would happen if they never banked the money from customers?

If they sent out invoices to customers then the vat would only be accounted for when the customer paid.

Does this help?

Marilyn

• A clever person solves a problem.

  A wise person avoids it.

  Albert Enstein

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• # 102892
• Mon 24 Nov 2014 05:58 PM

Hi Jackie,
There is unfortunately often a big difference between doing things correctly and doing things the way our clients want. In my opinion, it is our responsibility to inform our clients the correct way of entering cash and VAT and the potential consequences of what happens if there is an HMRC inspection but ultimately if your client insists otherwise then that is what I think you should do. Howard Wand

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• # 102894
• Mon 24 Nov 2014 06:17 PM

Hi Jackie.....Cash should be accounted for at the point of Sale whether CASH CHQ OR CARD.More importantly if they are calculating VAT on cash banked the SALES will be understated.As this will be net of cash expenses and wages paid.Casual labour???.....All wages paid to any persons now under the RTI scheme should go via PAYE,unfortunately no such thing as Casual staff. Hope they are recording under PAYE?If they will not record the VAT correctly , then they are at risk under Money laundering regulations.Which could be a potential hazard for yourself.Although we a like to accommodate clients, at the end of the day it is your work and reputation.Stand firm and advise correctly, it pays off in the end better to have work that is being processed correctly, thanone major headache later for all concerned.I have over 25 years experience and trust me , you are better off getting it right in the first place.Well done for spotting the error and you are right in advising the client that they are wrong in this case.Hope all goes well.

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• # 102955
• Tue 25 Nov 2014 08:18 PM

Thanks for the advice. Has confirmed what I thought was the correct way of recording VAT.

Thanks.

J

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