Cash Traders Beware!
HMRC like to keep a keen eye on the VAT returns of cash traders such as hairdressers, cab drivers and tea shops, the reason being that cash brings with it the opportunity for businesses to hide sales, but also increases the chance of mistakes being made. Whether purposeful or accidental, the risk of underpaying VAT is there.
For each business type, HMRC benchmarks typical profit based on turnover. When a business reports figures that don’t fit the expected pattern, they may well end up being investigated and asked to explain why their figures are not in line with expectations.
Visits from inspectors are likely to come out of the blue. A restaurant or salon may receive an unannounced visit towards the end of a day of trading when the day’s takings will be examined and checked against a recent VAT return. A mismatch between the two sets of figures will spark a more in-depth investigation.
If yours is a cash business, it makes sense to be prepared. Ensure that cash takings are reconciled daily, and that you keep a paper trail from cash taken all the way through to VAT returns.
For help and advice on this or any other issues, please get in touch with our Lancaster office. A member of our senior team will be happy to arrange an informal meeting to discuss ways in which we can support you and your business.
Author: Alan Taylor FCCA
A former pupil at Ripley St Thomas C of E High School, Lancaster, Alan joined Scott & Wilkinson direct from school in 1994 and qualified as an Accountant in 2001. As practice manager, Alan is responsible for the day-to-day...
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