AIBU to want to scream idiot at the next person

[helloclitty]

who uses the term "hard working person" in regard to tradesmen in the cash in hand tax avoidance debate.
I have heard many people saying leave the hard working people (tradesmen) alone they're just trying to make ends meet and target the rich.
Is the general consensus that people who earn high salaries are less hard working than people who earn less?

It feels like the responsibility is put in to my hands, as the customer, to ensure that the tradesman I use pays his taxes, rather than leaving the responsibility into the hands of said tradesman.

The problem with cash-in-hand working is that some people do choose not to declare their earnings, and they're almost impossible to trace in cash.

FWIW, HMRC take the view that tax evasion is almost always done by individuals (very rarely companies, although when companies are involved in tax fraud it tends to be because they've been set up purely to facilitate tax fraud rather than as a genuine business that also happens to minimise its earnings or overstate its expenses).

The individuals who commit tax fraud are either the very wealthy - the kind of people who have undeclared bank accounts in Switzerland - or the self-employed cash-in-hand workers.

How much does tax evasion cost the Excequer? Very roughly £20 billion a year, of which £15 billion is down to cash-in-hand workers. (That compares to annual tax receipts of around £450 billion a year, to give you some idea of the scale. The bill for tax avoidance is around £15 billion per annum, so tax evasion is a bigger problem than tax avoidance. That often surprises people.)

£15 billion is about the amount that would be raised by adding 1p to the basic rate of income tax. Or, to put it another way, how much it would cost if the VAT rate was put back down to 17.5%.

Final post from me before I go and do some work!

Have you ever heard the story of how Lester Piggott was caught for tax evasion?

He was investigated by HMRC (then the Inland Revenue) because his books as a self-employed jockey just didn't add up. He played a blinder with the Revenue, making himself out to be a sweet innocent chap hopelessly confused by the complicated tax system who had under-declared his earnings in error rather than deliberately. The Revenue accepted this, and told him to write a cheque for the tax he owed and all would be well.

Which Lester did.

Except the idiot wrote the cheque from an offshore bank account which he's conveniently forgotten to disclose to the Revenue when they were investigating his tax returns!

Unsurprisingly, they threw the book at him.

There are ways to check if there has been some cash in hands though. You can check how much they are declaring and the way of life. If they declare very little but can afford to pay for holidays, a new car etc... (even if it's in cash, you know they will have that hols, car etc...) the you know there is an issue.

I am still as to why ordinary people should be transformed into some sort of 'tax police' by being told you can't pay cash.
That's wo talking about the fact that we are not suppose to use cheques any more. So the only way to pay that would be left is credit card.

Have you ever seen a tradesman wo a credit card machine? probably not mainly because it is extremely expensive and not manageable for very small businesses.

lol at the story.

That's what I mean, if you want to catch someone, you can.

Sorry, really the last post this time!

There's no problem at all with a trademan offering a discount or mates rates - that's his choice as a business man.

Provided he declares the income he's earned from his mate on his tax return.

There is an issue if he doesn't declare the income he's earned frm his mate on his tax return because that's illegal tax evasion.

FWIW, I don't think there's an easy answer to this. I'm certainly not going to start deducting tax from my cleaner's weekly money - I have no idea whether she earns enough to pay tax, or files a tax return, and neither is it any of my business.

I think we need a culture change which makes tax evasion as unacceptable as benefit fraud or drink driving. Only when a person's peers put pressure on him to conform will his behaviour change.

I would also offer an amnesty so that cash-in-hand workers who know they're in the wrong but don't know how to put it right can clear their slate. I know a teacher who did cash-in-hand tutoring when times were tight who lies awake at night panicking that he'll get caught one day. I'd love to help him get his position straight.

Cinnabar - I was told the LP story by a well known jockey - what a twit LP was.

This has been a problem for years. My dad was in a pub when someone was boasting to everyone about all the undeclared cash in hand work he was doing. He finally asked my dad what he did, to which my father honestly replied....I'm a tax inspector.

He had never seen someone leave a pub so quickly in his life.

I don't know how many of you are aware of this campaign.

secure.38degrees.org.uk/page/s/olympic-tax-dodging-petition

There are ways to check if there has been some cash in hands though. You can check how much they are declaring and the way of life. If they declare very little but can afford to pay for holidays, a new car etc... (even if it's in cash, you know they will have that hols, car etc...) the you know there is an issue.

Absolutely. And HMRC does do quite a lot of that. The problem is that it's expensive for HMRC to do the necessary checks.

Suppose that they suspect that someone is living beyond his (declared) income. First, someone has to bring the tax evader to their attention in the first place. Unless an HMRC official happens to live next door, the chances are the Revenue won't have a clue that this particular person is dodgy. Then they have to have some watch him for quite a long period of time to establish that he is indeed living the high life (loads of reports of tax evasion to HMRC are malicious, for example). Then they have to show that he couldn't have got the cash in a legal but none-taxable way (inheritance, win on the horses, gifts from family, etc) which isn't particularly easy. Then they have to actually prosecute.

Often, and regettably, either they don't know to investigate in the first place, or it's not worth it because it would cost more than the back tax.

HMRC are getting cleverer at automated review of taxpayer information. If a window-cleaner, say, files a tax return showing a profit margin of 5% when the average across all window-cleaners is 15% then he may well get investigated.

Chaz - fab story about your dad!

I know I'm monopolising this thread, but may I make a point about the Olympics?

Campaign group Ethical Consumer launched this story but unfortunately got the wrong end of the stick. They claimed - entirely incorrectly - that McDonald?s (a "supplier of burgers and fries" as the FT put it ) and Coca Cola won?t pay any UK tax on the sale of Olympic burgers and drinks.

Wrong.

There is an Olympic tax break. It exempts foreign companies and foreign-resident workers from UK tax if they're coming to the UK solely to provide essential services for the games. Services such as broadcasting to their home country and providing the Olympic results service. Non-resident athletes, coaches, trainers etc. and all the Olympic officials also qualify for the tax break ? but only if they are non-resident in the UK.

How is McDonalds providing the food service? Is it a man in a straw hat with a freezer box from McDonalds Cayman? No ? it's McDonalds UK which will be selling the millions of burgers and buns, with 2,000 UK-resident staff. And it will be paying UK tax on its profits.

And it won?t be EdF France sending over a portable generator to light the floodlights, but EdF UK supplying electricity generated in the UK. And it will be paying UK tax.

And so on.

Why do I care? Because right-minded people waste their time and energy on non-issues like this one, when they could be directing their efforts where it really matters.

Like the fight against tax evasion. Or campaigning against real tax avoidance rather than invented-for-a-slow-new-day prentend tax avoidance.

I know quite a few people who tax evade (is that how you would say it?) because of the work they do, they declare their earnings to suit themselves and their lifestyles although not exactly the high life are a bit more comfortable than they would be paying full tax.

Obviously an attitude and culture change is needed, but I can guarantee that won't happen under this government or one like it because the general consensus is that the little man is always the victim. Also the belief that those in positions of power exploit the systems just as much if not more than your average joe when they don't exactly need to (thinking MPs expenses, Phillip Green, David Camerons family tax issues, latest Barclays scandal) means that people feel justified in what they are doing as they're just trying to get by.

Also in the current economic situation where the majority of people feel squeezed and nervous about what the future holds they are not going to be falling over themselves to hand it over to the tax man even if it could actually help the situation they are struggling with. Long term benefits are hard to see when you're struggling with the short time.

Yes, you would say tax evade.

I agree wholeheartedly that the only chance for change is a culture shift.

We need a society where the gap between the richest and the poorest is much smaller.

Having a more egalitarian society would be beneficial for lots of reasons and is offered up as the solution to lots of problems however I don't think its going to happen any time soon and with the cuts to public services it looks doubtful for at least another generation or 2.

Yes

BUT - it's far more worthwhile signing a petition demanding egalitarian measures than for the scrapping of non-existent Olympic tax breaks for UK companies!

Rant over.

Great posts cinnabar

Yes, very informative Cinnabar thank you

there seems to be a lot of confusion here over VAT and Income Tax.

YABU.

I couldn't give a shit if someone earns £20 cleaning cash in hand and doesnt declare it. This is just another way for the government to turn public opinion against the working classes and deflect attention from the people evading millions.

Try harder

They would still need to register as self employed and file a tax return.

They would still need to register as self employed and file a tax return.

Where does the line get drawn though.. how much of a big brother state do we want to turn into.

What about the businessman who cuts a neighbours grass once a week and she pays him £20.. should he declare it? I wouldnt expect him to.

Tryharder - personally, I think that both the working class evaders and the millionaire evaders need to be made to clean up their act. Pointing out that some cash-in-hand traders are evading tax distracts no-one from the dodgy millionaires. And neither should it. But neither should cash-in-hand traders be treated like untouchable modern day Robin Hoods.

Squeakytoy - very happy to (try to) clear up some of the confusion, if you can point me towards the posts you're thinking of.

What about the businessman who cuts a neighbours grass once a week and she pays him £20.. should he declare it? I wouldnt expect him to.

Genuine question - are there many business people who do that kind of thing?

I'm familiar with the sons/daughters of business people who do grass cutting/babysitting type work, but they'd be below the tax threshold anyway.

I suppose you might get someone who, I don't know, loves to bake and makes the occasional cake and charges cost-of-materials-plus-a-wee-bit-for-their-troubles to mates. But I'd argue that they weren't trading and hence it wasn't a taxable activity.

I am not confused Cinnabar. I run a VAT registered company and spent many years as a payroll manager too.

It is in general that I think many people are confused over the issue.