Supplier invoices are on the system as the correct date and the same for sales invoices but he uses the date on the bank statement for any cheques paid out to suppliers or paid in from customers. So for vat cash accounting he his actually wrong.
When you pay, or when you receive a cheque is the date you should use. You could have £10,000 worth of cheques, you may decide to bank them in the next tax year to bring your income down in this year - unfortunately it doesn't work that way.
__________________
Johnny - Owner of an overly-active keyboard.
A man who can read, yet doesn't, is in no way wiser than a man who can't.
It could be that he does not have access to the cheque book or to remittance advice from customers. In which case he is going off the bank statements only.
As you realise now this is incorrect based on the scheme your customer is on.
I would suggest you make the suggestion that you post supplier and customer payment onto system yourself, could be good for you to add to the service you currently provide.
Be really careful here as payment by cheques and debit/credit cards has the force of law behind it.
Have talked a few times about the cash accounting scheme being unsuitable for this business given its a cash business, but this now just adds to the confusion.
NB - the date a cheque is paid in and the lodgement shows on the bank statement is not the clearing date of the cheque, although thats an aside and irrelevant for this scheme (just thoguht I should throw that in as an ex Banker!)
The force of law relating to cheques:-
If you are paid by cheque: you receive payment on the date you receive the cheque, or the date on the cheque, whichever is later.
Ie the date you physically receive the cheque in the post is the tax point, unless the said cheque is post dated in which case the later date is used.
See HMRC VAT guide 731 sec 4.4 or better still the VAT act itself.
Your client is best writing on the sales invoices the date a cheque is received, or using some simple method.
Care re debit/credit card payments - same section of the guide.
-- Edited by Cheshire on Wednesday 22nd of March 2017 09:37:44 PM
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Luckily the cheques are being presented the correct way on my new clients books. It got me thinking back to when one of my other clients accountants were doing the books manually and couldn't ever see there being any cheques lodged. I encouraged this client to pay everything by DD where possible. Will definitely have a good read of the article at some point.
