ajnmx
Blogger
Share this content
0
19
14497

Paying an invoice in cash

Paying an invoice in cash

At one of our sites an invoice (around £2k) was paid in cash. The invoice was more of a receipt, it didn't show the trader's name or address or any other details. 

This is against all procedure and the person responsible is being dealt with accordingly, but is there actually anything legally wrong with doing this?

Replies

Please login or register to join the discussion.

By tom123
24th Jul 2012 07:38

Yes

It is perfeclty legal to pay an invoice in cash.

It could help to get signatures for larger amounts, so the supplier doesn't dispute receipt.

 

Your internal processes are, however, up to you, and can specify limits for petty cash payments etc

Thanks (0)
avatar
24th Jul 2012 09:45

Invoice needed for accounting records

tom123 wrote:

It is perfeclty legal to pay an invoice in cash.

It could help to get signatures for larger amounts, so the supplier doesn't dispute receipt.

 

Your internal processes are, however, up to you, and can specify limits for petty cash payments etc

 

How will the OP get a tax deduction then without an invoice to support the payment? 

Thanks (0)
avatar
By ajnmx
24th Jul 2012 08:18

Ok so paying it is fine. What I'm wondering now is if the invoice that was paid was legally acceptable.

According to the businesslink website an invoice must contain certain information (e.g. name, addresss, company name etc). The website says the information must be included (it's talking about a regular invoice here not a VAT invoice). So is this information a legal requirement?

What I'm wondering is if all our invoices were simply receipts for cash payments with no details of who has been paid and why, surely we'd be doing something wrong?

Thanks (0)
25th Jul 2012 11:52

I wouldn't worry too much

Unless you are in a regulated sector, or the goods were for export and VAT was an issue, or MLR is a problem for your company.

By all means discipline your member of staff if that's what you need to do for a breach in company policy, but i'd be relaxed about the long arm of the law reaching out for you.

D

Thanks (0)
24th Jul 2012 09:05

No invoice needed

Legally, you don't even need to issue an invoice. What happens if you go into a shop and buy a mars bar?

Thanks (0)
avatar
24th Jul 2012 09:57

Only VAT invoices are legally defined

If yo are not VAT registered it does not matter.

If you are VAT registered then you should issue a proper VAT invoice or receipt subject to the 'less detailed VAT receipt' threshold which I think is £20 but this needs checking. See here

Peter if you buy a Mars bar you should be offered a till receipt which satisifies the less detailed criteria

Thanks (0)
24th Jul 2012 10:57

Chris

I agree that you usually get a till receipt but they don't have to provide one unless you request a VAT invoice.

Thanks (0)
avatar
24th Jul 2012 11:27

And your point is?

Peter please note I said 'offered', perhaps I should have said 'provided if requested'

It is all on the link I gave.

 

Why Oh Why do people post here without first performing a simple Google search?

Thanks (0)
avatar
By ajnmx
24th Jul 2012 14:31

Why?

Chris Smail wrote:

Why Oh Why do people post here without first performing a simple Google search?

Do you mean me? I did do a google search and found the businesslink page I mentioned, and everyone who has replied has flatly contradicted it. That is why I posted on here - because what you read on the internet isn't always the full story (to put it mildly).

Thanks (0)
24th Jul 2012 11:45

My point is

exactly as I said.

You said: "If you are VAT registered then you should issue a proper VAT invoice or receipt subject to the 'less detailed VAT receipt' threshold"

I explained that wasn't the case: "I agree that you usually get a till receipt but they don't have to provide one unless you request a VAT invoice."

Thanks (0)
avatar
27th Jul 2012 13:29

Yes - proper invoice required for tax deduction

But it isn't just for VAT purposes that you need a proper invoice - you need a proper invoice, detailing the type of expenditure, the purchaser's name & address and the supplier's name & address to prove that the cash has been spent wholly and exclusively for the purposes of the business.  

You may not have shareholders to account to, but everyone has the Inland Revenue to account to and if there is nothing to prove that £2,000 was spent on company business, then the Inland Revenue may have every reason to conclude that it was not and disallow the deduction for tax purposes.  

Of course no-one is infallible and the odd invoice could go missing - if there was a missing invoice for expenditure of say £20, I doubt you need worry about it, but for £2,000 I would certainly insist on a proper full-blown duplicate invoice from the supplier - not just in order to satisfy the taxman but also, for internal purposes, to check against the goods supplied & ensure you're not being ripped off.

So, I would say, yes, it is a legal requirement to have all expenditure supported by proper invoices if you are expecting to claim it as a deduction for tax purposes - whether that expenditure is paid by cash or cheque is irrelevant.

Thanks (0)
avatar
By Tim 59
27th Jul 2012 13:58

I would suggest that the supplier is in breach of the business names act by not disclosing his name and address, which is in fact a criminal offence.  I would strongly agree with the previous respondents: no invoice, no tax deduction. How would you refute an HMRC challenge that the amount represented a cash payment to a member of staff or proprietor. I would have serious concerns about my staff and basic financial controls if a £2000 cash payment can be made to an untraceable supplier. I would suggest that there must exist some means of contacting the supplier as how was he engaged in the first place. You could at least trace his details and make a note on the file. Do remember that HMRC have the power to levy a penalty for failure to maitain adequate records, although it is unlikely for a one off error.

Thanks (0)
avatar
27th Jul 2012 16:06

@susanna

I can't wait for the day a client's account's are queried and the Revenue insist that the taxable income is reduced because whilst they have the salers invoice it appears it was paid in cash and their is no proof of receipt because the client didn't bank it......

 

Opinion or fact?.....thats all that matters, now the revenue may query things if there are missing receipts but that isn't against the law.....a bit different with vat where you are trying to reclaim the input tax.

Thanks (0)
avatar
27th Jul 2012 16:53

@justsotax

Well, quite - they would insist on its being charged to Drawings/Director's Loan unless there was other proof that an employee had run off with the cash.

But we're talking about purchase invoices here and it is against the law to claim an income/corporation tax deduction for an expense that has not been incurred, because that would result in less tax being paid than there should have been - no different to wrongly reclaiming VAT input tax. £2k deduction will result in a minimum tax saving of £400 after all. 

I'm not saying that in this case the expense hasn't been incurred, but if you don't have a proper purchase invoice in support of the expenditure, it will be very difficult to convince an investigating HMRC officer that this £2k was not handed out to Sunshine Holidays rather than Justsotax Accountants...

 

 

Thanks (0)
avatar
By jndavs
03rd Aug 2012 09:34

Just a moment...

It could be that this is a genuine expense.

No vat invoice so no reclaim of input vat.

If you fall within the money laundering regs, you may want to file a report if you suspect the supplier is not above board.

HMRC may query a transaction without sufficient backup but it is not illegal to claim tax relief for genuine expenditure.

Thanks (0)
avatar
03rd Aug 2012 10:05

Of course you could always just generate
a Homemade invoice? Hmmm ... An invoice can be as meaningful or meaningless as Paying by cash or cheque depending on whether the person involved is trying to pull a fast one. As you say we are talking about £400....so why would you choose to 'fiddle' it on that basis.

Thanks (0)
avatar
05th Aug 2012 10:04

Yes, agree that genuine expenditure should be claimable...

... without a supporting invoice - I was wrong to say that side of things was actually illegal, but how can you prove that it is genuine if you have neither invoice nor supplier's bank details?  All I'm saying is that it would be difficult to convince an investigating officer that there had been a genuine expense if there was not a supporting invoice, especially if the payment had been made in cash when there could be no check made on the recipient by following through a bank transaction.  You might be able to show HMRC the goods supplied but then it could be very time-consuming to flip through all your other invoices to prove that you didn't acquire them from someone else.

The original question asked whether it was a legal requirement for a commercial supplier to issue the purchaser with a proper invoice, stating the supplier's name & address etc and I believe that it most definitely is.

Thanks (0)
05th Aug 2012 10:25

No

susanna russell-smith wrote:

The original question asked whether it was a legal requirement for a commercial supplier to issue the purchaser with a proper invoice, stating the supplier's name & address etc and I believe that it most definitely is.

It's not.

Thanks (0)
avatar
06th Aug 2012 09:14

I would add a further comment

assuming this is a genuine expense....then there should be something to show for it....if its £2,000 its gonna be a reasonable size.....van....computer system....website....for which no claim would have previously been made....just show the revenue the item as further proof....or take a photo.....

Thanks (2)