Builders/painters/mechanics etc that do cash in hand work…tax avoidance

Why do they insist on charging the same amount as if they were paying tax ?

Id rather pay someone that does declare what they earn and at least tax is being paid.

If you are not going to pay tax how can they possibly think they can charge the same rate !

Just to add this is what a friend told me…

Paying cash doesn’t equal tax avoidance.

my friend said that the funny laugh and wink at the end of the conversation when discussing payment didn’t mean anything…it all makes sense to me now.

I suspect the same applies to “Business Consultants”, “Entrepreneurs” and “Politicians”.

Method of payment and occupation do not equal tax avoidance.

Do you shop on Amazon?

Even some hookers pay tax. (A notorious escort connected to a high profile scandal used to bank at a branch where a friend worked, and was quite open about her job and her accountants and tax charges)

Agree with the Amazon comment, hate it when they are cheapest for something….

Paying cash doesn’t equal tax avoidance

@mike you are correct. Tax Avoidance is legally paying the minimum tax. What tradesmen who do cash in hand are doing is tax EVASION which is illegal.

A good friend was a mortgage broker, it was common practice for self employed to state quite openly that what they put on their tax return was not their true income as they did many jobs for cash. They did this as their tax return income was too low to qualify for the mortgages they wanted. The Australian tax authority has the interesting tactic of gaining access to the self employed’s mortgage applications and comparing the amounts stated with their tax returns.

I never pay cash for such jobs.

sorry, Paying Cash doesn’t equal tax evasion either, it may happen but it’s not certain to. Many people still use cash as it’s easier, more certain and means you can pay for goods etc with out waiting for it to clear etc.

My standard response when asked “How much for cash?”:

“Oh, that was the cash price.” 🙂

Surely the reason they charge the same amount as if they were paying tax is to get more money into their pockets if they did indeed choose to not pay tax? Thereby making the extra money a bit of a bonus for taking the risk of not paying tax. A bit like most other sorts of crime i suppose.

What tradesmen who do cash in hand are doing is tax EVASION which is illegal.

Err no.

When you buy a paper from your local paper shop and hand over cash is that tax evasion?

Some tradesmen would simply rather have the cash than wait for the bloke with the 4 bed house in suburbia and the fancy BMW in his drive to be bothered to actually make the bank transfer he promised to do three weeks ago…

This isn’t something I’ve ever come across unless the person who had done the job is unemployed.
If I was paying cash I’d be looking to save some money. I think standard practise is for them to bill for so much, to cover materials and so many hours, then to take some cash to benefit both parties…this works doubly well if the person paying earns a bit on the side too.

And “cash” can often just mean an immediate payment – by cash, cheque or debit card. A lot better for a business than waiting 30 – 90 days for someone to settle an invoice.

Yup, plenty of good reasons to ask for cash other than tax avoidance. You have it there and then rather than invoice and wait a number of days (losing interest, out of pocket for materials, possible cash flow problems, etc.) Usually reasonable to ask for some discount due to these benefits.

Whether the tradesman decides to then declare that cash is his business.

OP’s friend is sanctimonious enough to assume that cash payments mean tax dodging, but not so honest as to not want a cut of the action!

I never understand this obsession with self employed tax “avoidance”. It’s legal, so what’s the issue?

I’m PAYE, and given HMRC’s propensity for sticking me on tax code BR1 every sodding year I have to chase them up to make sure that my tax code is changed back so I pay the minimum legal amount of tax.

What’s the difference? Is it sour grapes? I know for a fact that if I were ever to go self-employed I’d make damned sure that I never paid a penny more than I needed to, and I’d take advantage of all the random little tax peculiarities that the government has seen fit to introduce. The one that springs to mind is one for small service companies and VAT – charge 20% on your invoices, but only pay 13% to HMRC. No idea how that works, but it’s legal so why not take advantage?

When your self employed it’s tax efficiency not avoidance, and yes that means paying the legally required amount of tax.

Anyway the OP’s mate obviously thinks the massive gaping hole in the UK economy is due to commoners doing cash in hand work.

Odd thread. In my experience a tradesman has always given me a discount for paying cash. Whether they declare that income is another matter and not my business.

The usual giveaway is when they don’t want to give you an invoice. That’s pretty good evidence that tax evasion could be taking place. The interesting moral question is whether that makes the payee an accessory to tax evasion.

oh dear oh dear I cant believe you lot sometimes…so righteous when it suits

Anyway the OP’s mate obviously thinks the massive gaping hole in the UK economy is due to commoners doing cash in hand work.

I don’t think he thinks that

t…

The usual giveaway is when they don’t want to give you an invoice

you couldn’t have said it better

As above, cash is fine if put through the books correctly.

Obviously though cash is also easier* to not put through the books correctly 🙂

* than other payment methods.

I had this just last week. I had a screw embedded in my car tyre and went to the local garage to have it fixed. The cost was £10 for cash or £10 plus VAT if I paid on my card.
As it happen, I found a fiver on the floor while waiting so happily paid cash 🙂

EDIT – makes no sense

I don’t think the odd cash job is any less ‘honest’ that buying a new bike on ‘bike to work’ scheme with no intention of ever commuting on it.

is that like hoping not to get caught on import duty & VAT too?

I don’t think the odd cash job is any less ‘honest’ that buying a new bike on ‘bike to work’ scheme with no intention of ever commuting on it

There’s some logic in that, but I’d be surprised if the average self-employed person taking on cash-in-hand work is only doing it once a year.

My moral compass certainly won’t allow me to get a new stead on the bike to work scheme knowing my nearest office is a 160 mile round trip.

I’d love to see how many builders, plumbers etc declare all their cash/earnings.

Look at it this way- you get paid say 30k in cash. Your going to be paying tax on 20k of that. You do a hard job and iregular hours. How easy would it be to declare you only made 15k last year? For one thing that dreaded VAT bill would be tiny. If your disorganised, spend as you earn- under-declaring would become the way of life.

I wonder how many people slip easily into this? Lots- tempting I’d say.

WHO can say otherwise? In Greece ^ is rife.

Being PAYE is easy- how many of us given the choice would actually declare the right figure or adjust it slightly as it seems to much?….

@mike _ I would not be surprised to see that the total amount of tax evaded (ie illegally) was greater as a result of cash-in-hand traders than it was via schemes like the one Gary Barlow was involved in.

@stilltortoise – it is your business if there is a shortfall in government taxes and we end up with cuts to state funding for NHS etc or if as is likely PAYE taxpayers have to take up the slack.

The one that springs to mind is one for small service companies and VAT – charge 20% on your invoices, but only pay 13% to HMRC.

Ermm….it doesn’t in optics par of what you pay for is a medical service which is non vatable at the front and rear end of the transaction, therfore to make life easier for both gov’t and accountants opticians practices are allowed to work on a lower vat rate (that has to be negotiated with hmrc)

How easy would it be to declare you only made 15k last year?

It would be easy for a nurse – a hard job and irregular hours – to break into your house and steal the savings from under your mattress. Is tax evasion any more/less illegal than that?

The whole question of paying tax does seem to muddy the waters between what’s morally right/wrong and what’s legally right/wrong.

it is your business if there is a shortfall in government taxes and we end up with cuts to state funding for NHS etc or if as is likely PAYE taxpayers have to take up the slack.

So do you suggest that every time I spend money I have to satisfy myself that the business is not evading tax? I don’t have the time, wherewithal and energy to do that. Sorry

schemes like the one Gary Barlow was involved in.

I dont think that was illegal (ie. evasion) it was an avoidance scheme which failed to work. i.e some clever accountant thought he had spotted a loophole, but hadn’t.

Tortoise – There is more than some logic. Its tax evasion trough fraud. In both instances the individual is making a decision to avoid tax because they think they have ‘already paid enough’ that year. pay.

Marcus, the cycle to work scheme is a really good example to be honest. I get the impression it is morally accepted throughout the whole management structure of a business that the staff can “take advantage” of a “tax break” to buy a bike on the cheap, yet never use it within the rules of that scheme.

I suppose another daft analogy is claiming child benefit but never having any children, but that might be a tougher one to get away with 😆

Cash + unwillingness to produce an invoice = probably not paying any tax.

cash + invoice = probably fine.

🙂

Tax avoidance is a bit like doping in sport.

We’d like everyone to be whiter than white and compete on bread and water / pay the maximum tax they can but in reality if we are in the situation we would do the maximum possible under the rules.

The fault lies with the rule makers failing to adquately draw a line and police the rules which leaves grey areas where people who have a different interpretation to us create resentment and jealousy.

People like to think we have an inate sense of fair play but that is bollocks.

People like to think we have an inate sense of fair play but that is bollocks.

Indeed, and HMRC hasn’t helped matters by being more aggressive about tax collection.

jfletch, it’s nothing like doping in sport. Doping in sport is illegal. As you point out, tax avoidance is just working within the rules to pay the minimum amount of tax possible. Morally wrong perhaps, but not illegal

Tax evasion is like doping in sport, since that is actually illegal and is where this whole thread started i.e. self-employed allegedly not declaring cash income.

Im finding some of this very confusing.

So some of you would want a discount for cash, yet still want an invoice and expect the tradesman to declare it?
I very rarely get offered cash (im a painter), if a customer asked me for a cash discount, then declared that he still wanted me to lose 20% of that to income tax I would unsurprisingly decline 🙂

I dont think that was illegal (ie. evasion) it was an avoidance scheme which failed to work. i.e some clever accountant thought he had spotted a loophole, but hadn’t.

Its legality was unknown – that’s why HMRC require you to declare the use of a tax avoidance scheme, so they can decide whether or not to take it to tribunal and get a ruling – which they’ve now done.

A glance of the ruling was interesting – the judge said (I paraphrase) that no-one with any kind of knowledge in the area could reasonably believe it to be anything other than a tax dodge.

anything other than a tax dodge.

Which means what? It’s daft enough that we have “tax evasion” and “tax avoidance” as two different practices in the eyes of the law. I know you were paraphrasing, but where does “tax dodge” fit into this?