I have just read an article on the HMRC about Sole-Traders who earn less than £79,000 can use the new simpler Cash Basis accounting method. As a new and small business this sounded like a good idea for me. How would I go about using QF differently using this accounting method?.
I currently have my current bank account and paypal accounts setup in QF. QF automatically pulls in my paypal transactions and I intend on importing my bank statements via csv or the plugin.
You can start using cash basis from the 2013 to 2014 tax year, if you:
Are a small self-employed businesses (sole traders and partnerships), Limited companies and limited liability partnerships cannot use cash basis.
As you stated - have an income of £79,000 or less a year (this is the threshold when you have to register for VAT)
Using the cash basis:
You simply record money when it actually comes in and goes out of your business (all money counts - cash, card payments, cheque, any other method). Therefore using the tagging feature, you can quickly tag all income and expenditure directly from the bank to prepare your Tax Return. Any unpaid sales or purchase invoices will not counted as income or expenditure until paid.
When you submit your Tax Return, you do not need to categorise the expenses and can simply enter your total business expenses on the Tax Return, although we would recommend that you categorise your purchases as normal when tagging on Quick File, as this will assist you in dealing with any HMRC enquiry/checks, should they raise one.
Type of records to Retain:
You must keep invoices or receipts for everything related to your business.
Thankyou for your very helpful reply. Do I record a sale as been paid if I have received the funds into my paypal account or does it not ‘count’ until its in my bank account?