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bigduckontax
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We are a vat and limited company with one employer

Customer Question

dear sir
we are a vat and limited company with one employer i want to ask i run a shop and i get cash , with the cash i directly pay my suppliers is this legal or not legal instead of banking first ?
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and happy to be able to help you with your question. Yes, it is perfectly legal. However, the following points should be borne in mind. When undertaking cash transactions always have a paper trail if only to head off some future HMRC inquiry. Also ensure that VAT is accounted for in all receipts and payments to enable accurate quarterly returns to be rendered. I once operated a company where the principal trading activity in the tens of thousands was in cash. On a VAt inspection the Inspector took one look at the accounting process and said he was wasting his time being there, marked us up not to be inspected for five years and departed with a gleam in his eye for Mr Paterl's corner shop! I do hope that I have set your mind at rest on this matter, but please, please do not forget the paper trail.
Customer: replied 1 year ago.
hi sir , thanks for the answer so my paper trail of cash will be the amount i give to my supplier ?
Expert:  bigduckontax replied 1 year ago.
Yes, amongst other things. Obviously suppliers main supporting paper work will be VAT invoices to enable you to reclaim input tax.
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Customer: replied 1 year ago.
we have the invoices but as we place orders with them several times a day we just tend to pay cash to them when ordering or delivering to keep my balance with them reasonable
Expert:  bigduckontax replied 1 year ago.
That is no problem providing that proper cash accounting takes place and overall the payments out tally with the invoices at intervals eg monthly.

In the way your company operates meticulous bookkeeping is essential.

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