I was having a chat with a client yesterday and in passing he mentioned doing work for cash. He is a Ltd Co and I am not 100% certain he meant he was doing work and getting paid cash i.e. no invoices but that was what I think he was implying. How would you approach this with him? He isn't VAT reg so no implications there but obviously it understates profits.
They need to know that any work they do for cash they must still prepare an invoice for.
Your engagement letter should protect you from any corruption of facts by clients who deal in cash by stating that it is the clients responsibility to provide complete and accurate records with explanations where necessary of all transactions in the period.
Where clients are paid in cash for jobs I have a seperate cash bank account representing what they have in their pocket (which can be substantial and can stay there for quite some time) and as it is banked transfer that to the legitimate bank account(s). Similarly if they buy anything for the business themselves it comes out of the cash at hand bank account first rather than the DLA.
Think of the cash account as a hybrid DLA account as at the end of the period any balance not supported by receipts or transfers to bank is transfered to the DLA (if they don't bank it then they've had it).
HTH,
Shaun.
p.s. as an aside and not saying that this is the case here (being paid in cash is very common as it gives clients clients the percception that they are getting something at a cut price where really they are not) but if a client ever hides income via cash payments then such is an MLR issue.
Of course, such is often quite difficult to prove which is why HMRC are so hot on investigating cash based businesses.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I think better to tell the business about AML and its consequences.few small transactions would be ok but not to a larger extent.it should be through banking channel or the company should deposit cash to their bank account.
Shaun, that is what I do I put any withdrawals of cash to a cash account. I have told him there needs to be paperwork for this or it will have to go to DLA. I will go back to him and remind him to make sure there is an invoice for cash work or HMRC will be interested.
luckily I don't prepare his year end accounts so the final sorting out falls to his lucky accountant, but I do make him aware of issues as they arise through the year.
