Put away your cheque book

Most shops have done away with cheques for some time and for many of us, those hand-written representations of money are a distant memory. The government plans to get rid of this form of payment completely by 2018.

The last bastion of cheque writing remains in the small business sector, with many trades people and small, off-line suppliers still using this form of payment – to other suppliers, from their customers and to make tax related contributions.

Businesses that rely on the custom of older people may be particularly affected, as according to the Institute of Fundraising, 6.4 million people aged over 65 do not have access to the internet and many are reticent about using credit and debit cards.

HMRC is now adding fuel to the anti-cheque fire, by deterring traders from settling their VAT liabilities using this method. All cheques posted to HMRC are now registered as received on the day the cheque clears, not when they have arrived in the post. Small businesses that don't take into account the amount of time the cheque might take to clear will run the risk of a late payment penalty.

The HMRC advises that businesses allow at least three working days for a cheque payment to reach them, and then a further three days for the payment to clear. This timeframe is almost impossible to calculate, as companies will have to make an assumption that HMRC will cash the cheque promptly.

For larger organisations, with a turnover of £100,000 or more (excluding VAT) all future VAT returns must be filed and paid online and any business that registered for VAT after April 1, will no longer be able to pay by cheque.

HMRC has justified this move for the following reasons. A spokesperson said: "The purpose of the change to the cheque clearance rules is to encourage compliance with the requirement to pay electronically by removing the cash flow advantage currently enjoyed by businesses paying by cheque. This change is also intended to make electronic methods of payment more attractive to businesses. We recommend that businesses make their VAT payments electronically as this is safe and secure and in, most cases, gives up to seven extra calendar days to pay or, if paying by Direct Debit, at least ten extra calendar days." For more information visit the HMRC website.

There are a number of benefits to switching over to the HMRC's online system: Paying online is a much quicker process and going through the online registration and enrolment takes just a few minutes. As soon as you've registered, you'll be able to submit your return.

The system is 100 per cent secure, encrypted to the highest commercial standards. Once registered you get a unique user ID and password, which allows only you, or someone you authorise, to have access to that information.

Using the Internet means a round the clock service, so it’s much more convenient for the busy business owner. The system is also much more reliable, as there's no risk of your return being lost or delayed on the post.

The change does not affect payments made by Bank Giro. These payments are treated as electronic which means that businesses will get an extra seven days for payment clearing.

While a few may lament the end of the cheque, overall, there are real business benefits to getting rid of this outmoded system and hopefully, by 2018 something new will have come along to appease the worries of Britain’s trades people and the elderly. If you have concerns about the abolition of cheques, or any other accounting queries, ask me on Twitter