[Feen]

Wonder what you all think about this? To date I have been cashing up every Saturday and banking cash every Monday. I bank cheques as I receive them and bank transfers look after themselves. I have a standing order from my work account to our joint account every week from which my wife draws cash for us to live on. I've decided that from next week, I will no longer bank cash. I will account for it properly in my books and we will pay ourselves the same amount from that cash rather than putting it in the bank and then taking it out of the bank. I just seems a waste of time paying cash in on Monday and drawing it out on Friday. I also plan to use cash to buy fuel for the same reasons. The bottom line will be the same. Any thoughts?

[Clive McDonald]

After two years i am only slowly coming to terms with wc bookeeping.What you say sounds fine either way.I suspect the taxman would prefer the former, because you bank all cash, and have a record of drawings.


If you intend to keep the cash you must have a cash in hand figure.Record each week how much cash you have coming in, and going out, then add last weeks cash in hand figure.This should match what you have in your tin. The taxman wants to see continuity of carrying over last weeks cash in hand figure etc.

your current method does this for you via a bank statment, your proposed new method will require you keeping a record.

[Feen]

I get what you are saying, but is that over complicating things. I intend to print off a weekly detail which will show cheques, transfers into bank  and cash IN and expenses and drawings OUT. I don't need to "carry" cash forward from one week to another as it will get spent on way or another and it will be accounted for. I agree the tax man would prefer my current system, but I think the that banking cash is worthless at this time with interest rates at their current level.

[Clive McDonald]

Last weeks cash in hand must be carried over and added to this weeks to arrive at the figure for this weeks cash in hand and in turn this must match the actual physical cash that you have.
You won't get hung for not doing it.

[martinsadie]

Last weeks cash in hand must be carried over and added to this weeks to arrive at the figure for this weeks cash in hand and in turn this must match the actual physical cash that you have.
You won't get hung for not doing it.

sounds like rocket science to me,i just keep a record of what i earn and spend the cash or put it in the mattress 

[karygate]

WENT ON THE TAX COURSE ABOUT BOOK KEEPING AND THEY SAID THE SIMPLER THE BETTER. THERE IS NO RULE TO DO IT AS LONG AS BOTH YOU AND THE TAX MAN CAN UNDERSTAND IT.(sorry just realized caps were on and too lazy to rewrite)

[poole bay]

as long as you have a record of money in and money out, tax man dont give a poo lol as long as he can read it.  bank cheques spend cash as long as you dont spend tax mans cut he wont mind.. regards carl

[Feen]

Yeah, going for simple I'm slowly learning that we have a huge ability to complicate our lives. I will do very simple accounting and the tax man, if he decides to look at it, should find it simple to understand....even if he's simple
Seriously, I don't see the point doing what I've been doing. For example, I'll buy diesel on my work visa card and then have to spend some time paying it in a few weeks either via computer or in the bank. Every time I go into the kiosk to pay for the diesel I have cash on me because I'm working, so why not pay it then? I'm a sole operator,so don't need to worry about employees and more complicated cashing up etc

[Clive McDonald]

not so.
The taxman runs three standard tests on you, one of which is the cash test. You fail it when you spend more than you earn.

For instance you earn £25,000 in the year. £8,000 is in cash and you draw hardly anything from the bank because the mortgage and poll tax swallows most of it. Your petrol and other items you have reciepts for comes to £3,500, so there is a remaining £4,500 in cash.

However you have already told the taxman that you spend £60 every week at sainsburys, pay your utility bills in cash, and buy clothes for your children, yourself and your wife on a regular basis.You agree with the tax man that you spend £12,000 in cash every year. He can't understand how you can spend £12,000 when you only have £4,500.

You can say you borrowed it off a friend, or that you won it gambling, but the best way is to keep a cash record with a cash in hand figure.

Even if you were declaring £50,000, but only had £8,000 in cash the figures would be very similar.It is far easier to do this week by week than to try to reconstuct  from scratch at the end of the year.

[Mr H]

I pay all cash and cheques in to the bank and have a standing order set up to pay a set amount each week in to my wifes account. Then when the accountant does the books at the end of the financial year and says you have earned £x less my weekly drawings I then take the rest as a lump sum out of the business. Its almost like a savings plan and it doesn't get lost in the weekly spending.

Regards
Mr H

[leapstallbuildings]

not so.
The taxman runs three standard tests on you, one of which is the cash test. You fail it when you spend more than you earn.

For instance you earn £25,000 in the year. £8,000 is in cash and you draw hardly anything from the bank because the mortgage and poll tax swallows most of it. Your petrol and other items you have reciepts for comes to £3,500, so there is a remaining £4,500 in cash.

However you have already told the taxman that you spend £60 every week at sainsburys, pay your utility bills in cash, and buy clothes for your children, yourself and your wife on a regular basis.You agree with the tax man that you spend £12,000 in cash every year. He can't understand how you can spend £12,000 when you only have £4,500.

You can say you borrowed it off a friend, or that you won it gambling, but the best way is to keep a cash record with a cash in hand figure.

Even if you were declaring £50,000, but only had £8,000 in cash the figures would be very similar.It is far easier to do this week by week than to try to reconstuct  from scratch at the end of the year.

It is quite possible to spend more than you earn over a given period if using personal credit card(s).  This is why I also keep my credit card bills for the required 6 or 7 years as well as the other records.  Bear in mind that it may be possible to offset some interest against tax if you do this.

[Clive McDonald]

agree with all.

you'll probably okay anyway.

The only other point is if you spend (or pay into the bank same thing), say £2000, but can only account for taking £1000 in that week or month. Where did the other £1000 come from.

hmrc states that you should keep proper books and records and that these should be clear and easy to follow. The clear and easy to follow part is taken to mean an on going and carried over cash in hand figure by most.The paying all the bank system does the same job.

[poole bay]

the other  1,000 can come from a second job like me iv just started up but stilll have a full time job i use the money from my day time job to pay for problems like new gear box clutch it does not matter where it comes from not all people have proffits some have losses like me  its all about money in and money out thats it just pay the tax on what you earn and you cant go wrong regards carl.

[LWC]

I know that by not paying in all your money could affect your credit rating at the bank, if half your money was cheques, say £1000 for example theyd think thats all you earn and then if you needed to it would be more difficult to borrow/ lend etc.

[Sunshine/Cleaning]

I used to do what you are proposing, pay cheques in and live off the cash.
Now I pay everything in and have a standing order paid to our joint account.

The problem I had with living off the cash was that my family felt if they needed some money it was always there. It gave them an unrealistic view of what money was available to live off.

Since the new regime I can honestly say things have been better, we set an amount to be transferred and are living to budget, money is accumulating in the business account and I have July's Tax money ready and waiting. I will carry on this way until I have 6 months worth of income "Spare" in my business account then pay myself a little more.

As for spending on business items, everything is paid for by card not cash. George tells me what I have taken for the year, the bank tells me what I have banked and if there is a deficit that was banked, then that amount has obviously been used for personal use and gets added to my "wage" from my S.O.

It couldn't be simpler.