To not understand how...

[MoonlightDancer]

someone can earn so much and not pay tax/VAT?

My parents have just had their drive and back garden done from a company that has been going years in my area, he mentioned he's got 4 more bookings similar to my parents so £10,000 each so that's £40,000 total in less than 6 weeks but he doesn't pay tax?

I didn't question it as thought he was joking but then a local builder was saying something similar he's done two loft conversions on my parents Road earned a similar amount? This can't be right surely? I looked it up and I don't understand the rules can someone clarify?

My sister has her own business and harps on about having to pay her tax bill at the end of January and she doesn't earn anywhere near these amounts.

He’s bragging/exaggerating to a certain extent, although there probably are work rounds. Perhaps he will get away with it for while, not forever.

What do you mean he doesn’t pay tax?? Did he say he doesn’t pay income tax or was he talking about VAT??
Your parents paid £10k but that’s not actually how much he’s taken home. He will have had to pay for:
Materials
Other people’s wages if he had other people working for him
Van costs - insurance, petrol, maintenance etc
Premises costs ie storage unit or such with rates and electric etc
Insurance costs - public liability, and out her insurances in case he is sued etc

Then there’s the factor that he probably oyncant work in terrible weather so may actually only be working 9 months of the year.

Of course it may be that he’s in the fiddle but it’s not as easy as saying he’s early £10k from a job as all of the above costs will have to be taken into account and he will only pay tax on what he actually takes home as his wage.

Entirely depends on how the business is set up.

I think a lot of tradespeople get a lot of cash in hand - which they should declare, but often don't.

Also, when you're self employed you can deduct expenses from your income which offsets tax, and if you think about the amount of materials they would pay for, plus transport and whatever else they can claim, by the time they've done that, it would offset the vast majority - if not all - of the money they get paid that isn't cash.

@summersherewishiwasnt I thought they might be...I kept thinking this can't be real...as it's not fair if my sister is paying so much every January. I don't have a business so not really sure how it all works Tax/VAT wise.

I hear all these stories of dodgy tradesman so was surprised when my dads friends son was harping on about it he's recently taken over from his Dad (Nice lad but abit dreamy) who was very straight as they come...no ripping customers or the system off type.

I'm not sure about the rest but my parents paid for the materials for the drive and were given the invoices. That's how my Dad's friend liked to work so customers could see exactly what they paid for.

The rest as you mention I didn't think about like the other people he had two groundsmen working for him. Like I say I don't have my own business so haven't thought about the other bits so when you put it like that I suppose they don't earn much.

I didn't know you could put things through as expenses.

The rest was paid BACS transfer when they completed the job.

Maybe he avoids needing to register for VAT by asking the customers to pay for materials.

A substantial amount of the £10k job will be materials, so in order to make a living from driveways, you'd almost certainly need to do more work than the VAT threshold, about £80k or so I think.

So if you ask your customers to pay for the materials that you install, you can probably call yourself a labourer and earn a decent wage without having to charge VAT. I don't know if this is legal or not.

The fact that he was paid by BACS suggest that he is above board in some respect, because the obvious indicator that someone is not declaring work is asking for cash. Obviously many people who do ask for cash are declaring their earnings properly, but it's a lot easier to fiddle the books if the money you earn isn't going through a bank account.

With a paper trail like that I'd be surprised this is tax free

@BarbaraofSeville ah I see what you mean...yes we try to avoid people doing cash in hand/no invoices...not keen on it at all.

You pay tax on profits, not turnover. He could have other things to offset against the turnover which would minimise his overall profit, quite legally.

Tradespeople are notorious for cash in hand jobs and not paying tax.

@misspiggy19 we once had a plasterer refuse to accept anything else but cash! We point blank refused as we had told them from the start we only do BACS transfer or something where we pay into and get an invoice etc which he assured me from the start that's the only way he works.

He got very arsey with us when he said he needed it to be part cash £650 (as he needed it for his child's birthday that day) and the rest via invoice he finally gave us a proper invoice with bank details it really annoys me when they try and pull that stunt!