Both previous contributions are correct From my point of view all is not lost on the sticky matter of unnamed cheques. I realise that it might just come down to commercial judgement whether it is simpler just to pay the tax on the cheque items (along with interest on the tax and penalties up to 100% of the tax) but this is a dangerous line to take unless you can convince the inspector that this is why you are doing it. Why, well you have already said that you have invoices for the cheques. So the production of and forensic examination of
(a) the "contempoaneous and bona fides" invoices
(b) along with your statement of the facts and
(c) the copy cheques that would inevitably have different handwriting (and hopefully pen) in the "Pay to line" from the "Amount payable line" and signature etc. might be enough to convince the Inspector that all is well in your tax affairs - from this point of view. He might be quite happy to have this spin-off enquiry into yourfriend's tax case.
Think about it carefully as if you decide to pay up for commerciality reasons I would be thinking well if those invoices arent worth the paper they are written on what about all the others he's "not worried about".
see my site for other considerations to think about and links http://www.wamstaxltd.com
regards and hope this helps
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