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Where Taxpayers and Advisers Meet

Tracing cheques

Posts: 1
Joined: Wed Aug 06, 2008 3:43 pm

Postby benp2004 » Thu Sep 21, 2006 12:29 pm

I am currently being investigated by the inland revenue. I've only just received the letter. I'm being investigated in numerous areas which I'm not worried about as I have the supporting invoices etc.

My only concern is that I claimed for subcontracting work out to a friend. I paid him by cheque but unfortunately I gave him a blank (unamed) cheque as he wanted to use the money to pay off a debt. I'm concerned that when I show them his invoice they trace my cheque and tell me it was for something else. My question is therefore how traceable are cheques written back in 2004?

tom 7000
Posts: 820
Joined: Wed Aug 06, 2008 3:30 pm
Location: Farnborough Hants

Postby tom 7000 » Thu Sep 21, 2006 10:57 pm

You can get copy cheques so the answer is easily. More likeley if they look into this point they may want a written statement from your subcontractor that he actually received the money....and that he in turn entered it into his tax return...if he didnt and consequently won,t give you the statement saying hes never heard of you...then you have an issue.

Bob Jones
Posts: 268
Joined: Wed Aug 06, 2008 3:43 pm

Postby Bob Jones » Fri Sep 22, 2006 1:45 am

There are two types of investigation carried out by HMRC in cases like this - aspect and full. Aspect enquiries will be limited to one or two specific issues - a full enquiry is what it says - an aspect enquiry can be converted into a full enquiry.
With payments made to others HMRC will normally ask for an analysis of payments - you will be epected to supply sufficient information to identify the recipient. You must then expect HMRC to check on the recipient.HMRC may ask for evidence of the payments as, of course, these payments could be disguised as payments to yourself.
I can forsee a problem here - the recipient has received a blank cheque on to which he has entered the name of another. I am not a betting man but I think it highly unlikely that this has been declared in his accounts. If you have a problem and HMRC stick to theirs guns you will have to weigh up the costs involved - either pay up and put it down to experience or go the Commisisoners and swear under oath and see what they decide. If you seek professonal help you will then have to bear in mind the professional fees - it may not be cost effective to pursue.

Bob Jones
Internet Taxation Ltd

Posts: 1931
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Location: Operate Nationally but based in Aberdeen

Postby wamstax » Sun Oct 15, 2006 11:44 pm

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
regards and hope this helps
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