working. a lot. and not declaring income for tax

[bebbeau]

i don't want to give too many details as i have not NC

but a good friend of mine is doing work cash in hand. an awful lot of it, to the extent she has had to rope in another friend to help her. i know she is not declaring it.

her "business" is all over fb, it has a name, a page, and everything...she is snowed under with work and i can't believe how brazen she is being. she has 4 dcs, if she gets caught she will be right in the shit. it would only take one person on her fb friends (and she has about a 1000) to get annoyed with it and make a call to hmrc

i daren't say anything to her, as if she does end up getting dobbed in i would not want her to think its me. but it doesn't sit right with me....i have been self employed for years and have been meticulous from the start about keeping everything above board

anyway just wanted to see what others think. i can't talk about it to anyone in RL for obvious reasons.

presumabley the people paying her arent paying tax, if this is all Cash in Hand.

and she will be affected in a year, if the job finishes. when the tax credits are lowered but the job is no longer there

You absolutely need to get her to register for tax, I'm self employed and my earnings come in under the threshold, but I do my return every year regardless. It's not worth not doing it and if she gets caught then she's going to be in the shit.

I think she is probably one of many, many people who do this. Even lots of legit businesses fiddle things a litttle bit/a lot in their favour. But then, when you look at the big business tax evader examples we have it's no wonder. Corruption from top to bottom. I don't think it's right, but it is very common. She's probably open about it because she thinks its fine to do it, on account of nearly everyone else doing it.

Cleaning, probably.
Must try to scare her into filing taxes for 2013-14. Not too late, but plan to do it now.

ps: she'll be owing NI contributions, too.

It's not that complicated, honest, especially as she's probably below the threshold, and I doubt it will affect CT that much (we get huge amount of CT in spite of both us having decent income).

How do you KNOW she is not declaring? Cash business does not automatically = not paying taxes.

but earnings less than £2,500 you dont have to declare do you.

AFAIK... you do, Lucy. You have to declare even 1p of earnt income (in theory).
There is no lower limit for not declaring.
In American system you don't have to declare if you don't owe, but in Britain everyone has to declare every bit of earned income, AND must pay NI if above ... £85/week? Some threshold like that. Actual threshold to pay income tax is much higher again.

You have to register a company within a certain time limit. If not registered and no company number I'm going to assume said business is not legit.

There's probably a bit of fuzziness though, in how the rules are applied, for low income sporadic enterprises. If she comes clean soon she'll be alright, it's if she drags this out that they will muster no sympathy.

Tax & NI liability thresholds here. £109/wk before NI kicks in, I think that says.

£109 pw is for an employee (class 1 contributions). Self employed threshhold is based on profits (ie after allowable expenses/deductions) and is higher.

Getting cash in hand doesn't necessarily mean it's dodgy-I am a tutor and my tutees pay me in cash but I am fully set up with HMRC and pay tax and NI.

That said, it sounds like she's being a fool. She will be caught and then the consequences will be a lot worse than losing tax credits. Have you told her what you think about it?

And a business does not have to be operated through a company - so "no company number" does not equal not legit!

Mumsnet is bloody dangerous sometimes.

I was very nervous about going legit when I first started up, and spent a couple of months working cash only. But I was very frightened about being dobbed in, and felt guilty too that I wasn't paying my share. Then someone reassured me about how easy it was to get the paperwork set up - and it is. I do my tax return online in July each year, it takes about an hour, and then file the same figures to the tax credit people, which takes about ten minutes. NICs are on a direct debit. Actually setting these things up probably took about four hours altogether, seven years ago. Council tax benefit took another couple of hours, but now takes five minutes to renew each year.

You must tell your friend that (a) it's much easier than she might think and (b) she WILL be caught in the end and the book WILL be thrown at her and (c) she'll still be considerably better off earning and declaring than sitting on her arse doing nothing.

If she's self employed it's either class 2 or class 4 NICs, can't remember which, but it's a flat rate, £2.70 ish a week I think at the moment.

As far as you know, bebbeau, when did friend start this business, or did it only take off in the last 8 months? I would think if she can pretend/argue that it only started this year, that she can easily still make it all come good without any penalties.

I don't know exactly about TC impact, but TCs are meant to make work pay, so she should still be better off even with earned income declared.

She get caught at some point so very silly. Ive just done my fifth online tax return. Its so easy and you be amazing what you can claim back like ink cartridges, uniform or in her case cleaning materials. Ask your friend to look at tax website for all in formation. The tax office is very helpful. Your friends needs to keep all records for seven years. She might get a nice surprise as tax does get returned if you overpay!!!!!

It's absolutely fine to run a business without incorporating a company. Incorporation is completely unnecessary for most sole traders and just adds complexity and expense.

Are you sure she isn't paying tax. It imperfectly possible to be paid cash and complete all necessary tax paperwork etc.

My Facebook is full of people making extra m

Sarah you don't think a Company needs to be registered? at say the Companies house. Which is the company number I'm on about! (Registration number in other words!!).

aciddrops that's the whole point. Annoying as it might be. The big companies are acting WITHIN the law. People not declaring income technically are not.

Oops...

My Facebook is full of people making extra money.

People offering cleaning/ironing services and selling everything, such as home made cakes, decorated shopping bags, occasion cards, bouquets etc.

I know at least 3 people who do Avon on the side...the chances of them declaring being approximately nil.

I also know two people who have cash in hand jobs...one as a pizza deliverer and another as an occasional bouncer in a local pub.

Tbh...I don't actually care. Most of these people have PAYE jobs and pay tax from that and are spending their free time earning extra.

The first thing I do if I have a plumber/electrician/any sort of tradesman...what I did last week when I had new carpet fitted...is ask if they accept cash with a wink and a nudge. It would make me a huge bit of a hypocrite to report anyone not declaring really.