My client does not have some invoices to explain monies being paid onto his account. He tells me that all monies paid in are from his work. Am I right in saying that I can not put them through the books unless I see an invoice to match each transaction being paid in and vice versa for payments out?
Any money being paid into a business will be seen as income for the business unless there is evidence to show otherwise and not the other way round. Also, if he is VAT registered, you would have to show the Output tax on the amounts in question.
Payments out, however, must also be evidenced that they can be allowable for deduction against profits, ie with an invoice. You can out them in, but be aware that should they be questioned, unless there is supporting paperwork, they may be disallowed against the profits. Again, if they are VAT reg, you cannot claim the Input tax unless you have a proper invoice.
My client does not have some invoices to explain monies being paid onto his account. He tells me that all monies paid in are from his work. Am I right in saying that I can not put them through the books unless I see an invoice to match each transaction being paid in and vice versa for payments out?
Get your client to sign a letter stating that this is non invoiced income and then you are covered in the case of an investigation. Explain to the client the importance of issuing invoices. The problem you will face if you don't put the income through is that the revenue will treat it as un declared income and will assess it for tax, apply interest and probably fines for not declaring it. If your client is VAT registered he may not have issued an invoice so that the customer thinks they are not paying vat. You will then have to treat these payments as "VAT inclusive".
Thanks for your replies a great help. My client has used his account to pay for non business expenses so for those purchases I have put them through the books but put them under disallowable expenses. Is this correct?
If they are non business expenses they shouldnt go through the books as expenses. If it's a business bank account the non business expenses should go through the drawings accounts or directors loan account. If it's a personal bank account then these expenses dont have to appear anywhere within the books of the business.
As your client doesn't have any Invoice and if he is VAT registered, then non-business expenses should go through either drawing account or director's loan account, In case it is business account.
-- Edited by Vinod on Friday 20th of November 2009 10:47:56 AM
