Suppose my client gives cheques to supplier back in September 2011 and most of them haven't been presented to the bank by 31st March 2012. It is normal for supplier to leave it months before presenting cheques and occasionally for the cheques to be cancelled and reissued.
When calculating March VAT return (cash accounting basis) should I delete these cheques as the invoices in question have not been "paid"? This will clearly increase the amount of VAT now due.
When is a cheque not "viable" for this purpose?
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Cash accounting
Under the cash accounting rules you can claim deduction of Input VAT when the cheque is sent or when it is dated if that is later than the date sent. You will only need to adjust the Input tax claim if the cheque is not honoured. The basis for this is if the supplier is using Cash accounting he must account for Output VAT when he receives the cheque and if he isn't using the scheme Output VAT will be due on the tax point date which I assume is the date the invoice was raised to your client.