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Cash in Hand? How Very Dare You.

Cash in Hand

Some of you will know that we’re in the process of upgrading our current kitchen. Not just new units but full knocking down of walls, and refitting. Quite a major job.

I’ve had more than a few quotes and the range in costs is quite something. Many of the builders came along, measured, looked at the architects’ drawings and headed back to their office to work on a price. But one didn’t. After looking around and getting an idea of what we needed he quoted us a price-range there and then. He could obviously see my surprise and I think he mistook it for shock at the price.

He then said “I can knock the VAT off if you can pay cash”.

After the initial thought of ‘I could save a fortune here’ I realised that I’d have no comeback if anything went wrong. But more than that, if he was prepared to deceive HMRC then would he con me too? What if he went bust half way through the job (I’ve seen these Rogue Trader TV programmes).

I’m not taking the moral high ground here and I appreciate the onus is on the Tradesman to declare the correct income but at the end of the day what he was suggesting sounded very much like Tax Evasion to me and that’s illegal.

According to a report by the Public Accounts Committee, more than two million people make cash-in-hand payments costing the Treasury an estimated billion. There is no law against paying someone in cash, but tradesmen are under a legal obligation to disclose their earnings to HMRC and say whether they are liable for income tax or VAT.

So if your business accepts cash payments please think about this:

  • Keep a good record of ALL sales no matter how they were paid (this makes it easy to prepare your accounts and tax documentation at year end).
  • Keep receipts for ALL Purchases (so you can easily see how much you’ve spent).
  • Bank all of the cash in a business bank account so it’s recorded.
  • If it doesn’t feel right – it’s probably dishonest. Don’t do it!