Is it morally wrong to pay cash in hand?

[Liketochat1]

Should paying tradesmen cash in hand be seen as tax avoidance? According to the Tories it should. What do you think? www.bbc.co.uk/news/magazine-18968679 Hope the link works!

Anyone who's ever taken their car onto the continent and waited until they got to Calais before filling up (because fuel is cheaper / taxed less in France) is avoiding tax. Anyone who has ever taken advantage of duty free is avoiding tax. Anyone who's rushed out to buy cigarettes / booze / fuel before the 6PM imposition of the budget on budget day is avoiding tax.

This sort of behaviour is what you are condemning if you condemn tax avoidance. An individual sees a way to legally reduce the tax they pay and modifies their behaviour accordingly. Would anyone seriously claim that any of the examples above are immoral? I wouldn't have thought so.

What do you mean, tuckchop? I don't understand the point you're making.

MrJP - I wouldn't class those activities as tax avoidance. To me (and this is subjective), it's only tax avoidance if the activity is contrary to the intent and expectation of parliament.

Denise 34
'the problem with greece with Greece was caused by the government spending
far more than they had coming in'

Exactly !!!! - they expect tax revenue, factor it into the budget, and then don't receive it as so many people are defauding on their taces.

Cinnebar: You may be right but small traders often offer a discount for cash in order to manage cashflow during a job that may take more than a few days and may have materials purchases to fund. Being paid by cheque also carries the risk of not being honoured...............something that tends to increase in difficult economic times and in a culture where declaring banruptcy to cynically avoid legitimate debts, is on the rise.

This is why the govt introduced the CIS scheme years ago to try and minimise cash in hand. Contractors and sub-contractors have to register and submit a payments return each month. Some contractors are eligible for gross payments and others have tax deducted at source of 20% so effevtively they do not get any tax free allowance. Of course this scheme doew not apply to domestic transactions.

abbscrosswoman - yes, you're absolutely right, they do offer a discount for cash in the circumstances you outline.

But of 2-3%. Not 25%.

Most traders operate on a much lower profit margin than 25%. If they routinely gave 25% discounts they'd go out of business very quickly.

The only way to make the economics of a 25% discount work is if the trader isn't troubling himself with the pesky inconvenience of paying his tax.

happyinherts - So it's morally wrong to give £7 cash to a young woman for walking the dog or £10 to an elderly man for mowing the lawn?

While it is not unlawful to do so, the odds are that if those cash amounts over the course of a year meant the person should pay income tax, or not claim benefits (bad assumption, but probably not uncommon) there is a problem.

If you never have any paper receipt for your payment, or come to know of a person taking cash in hand for a job but never get to know their name or contact number, what are the odds they are declaring little or none of the amount?

A window cleaner in this area was jailed recently for having lived off benefits while also earning thousands doing a round. He initially took it on when his dad was ill and too sick to do the round. I would bet a hundred quid that none of the people he went to had any paperwork and probably few had any contact number. They'd know him by sight, and anyone moving in would be told by a neighbour when he comes round...

It's easy to see that someone charging a householder a fiver every fortnight does not need to clean windows on too many houses to reach taxable income in a year.

Yes, you're implicated too, if you act in a way that prevents a paper trail (so you have no receipt for work done, for example) and would allow for checks to be made more easily, and income tax be avoided.

I just wonder what happens if some tradesman calls at the home of someone working for HMRC...

I'm not going to argue the morality of MPs, Mr Carr, bankers, or others, who may have made dubious arrangements over tax, nor about HMRC and whether they should or should not do deals with the likes of Vodafone, but if 90% of householder transactions (whether at a garage, with builders, plumbers, etc, or even with DIY and other shops) left no paper trail and tax could be avoided, then we'd all be guilty and the country would have no central or local services to speak of.

This "cash economy" might rise and drag us tax payers down (or income and other taxes up) due to the greed and avoidance of the minority (for now). They will be laughing all the way to a villa on the Med, and be sticking two fingers up to anyone who lives by the rules, and will call them (us) idiots for paying taxes.

reastie - DH has his own business and any money he is paid in cash gets paid straight into his business account and goes through the books so tax etc is paid.

I feel sure he'd explain that to anyone that asked, and if asked for a discount for cash, would equally say there is none, and why. But I bet also that he wil be happy to give a receipt (/ send an invoice) for payment and any tax (eg VAT) would get sorted out promptly, too.

It's clear that simply paying in cash, or accepting cash, isn't (and should not be) a problem, but some householders (at the upper ends too) will "try it on".

Sure, some shops may give a small discount (2-4%) for cash as that's what they would otherwise pay for handling a credit card transaction, but not all will do so. Others might give a bigger discount to regulars, because margins on some goods can be 30%, 60%, etc [even 100% on jewelry] so to discount by 10% or even 20% is possible, but eating into profits. But only a fool would buy something valuable for cash and not have a receipt just to get a discount.

CIS sub-contractors who have tax deducted at source do actually get a tax allowance, just not at point of receiving the 'wage'. They prepare accounts, or a statement of earnings which shows their income, less their expenses, if they are entitled to 'capital allowances' these are then offset. At the end of this a figure of tax due will be calculated, their personal allowance will be deducted, and the amount that they have already paid (had deducted over the year) will be set against the tax due, in the majority of cases this will result in a tax refund being due. So, they do have a personal allowance, it is just the point of application that is different to those on PAYE.

Exactly as you say, CinnabarRed

If hmrc decide a scheme is not legal, they can and do get the so-called tax avoiders, who are surely no such thing as their scheme is not a legal way of avoiding tax, to pay back the tax due. As you also say, this does not technically criminalise them, but it does mean they were evading tax not avoiding it, and can apply restrospectively. Which is why, imo, it's all well and good going on about how x, y or z is legal, that could just mean they have better lawyers and more money to fight the case for years, years years and years than HMRC

I also find it interesting that some posters seem to think laws are based on morals and are surprised at those who find an action, whilst legal, to be morally repugnant. Was slavery ok when it was legal then? Or was it right when women couldn't vote? The connection between the law and morality is not always that strong. Our laws are based imo on the primacy of property and benefit the rich over the poor. So it does not surprise me that tax avoidance schemes are perfectly acceptable to the ruling elite but minor tax evasion is reprehensible. Ship them off to Australia.

Maybe the PM and the government should be chasing up all those "rich" tax avoiders instead of making hard working tradesmen out to be unethical - what is unethical is those who make a mint finding tax loopholes to avoid paying their share. Silly Mr. Cameron.

Of course HMRC is chasing tax avoiders - how do you think you come to hear about Jimmy Carr and Vodafone via the country's media?

Because HMRC investigates, and takes them to court, and very often wins. Their tax affairs only become public knowledge once in court.

BTW, the Treasury Select Committee ordered an imdependent investigation into the deals negotiated by HMRC with Vodafone, Goldman Sachs and three other corporates. The enquiry was conducted by a very senior tax judge, Judge Parks. Parks concludes that 4 of the deals were as good as any reasonable negotiator from HMRC could hope for, and one was actually more favourable to HMRC than was reasonable. So it's not as though HMRC and government are doing nothing.

And, last Monday, Gauke announced further consultation into extending the regime that requires the promoters of tax schemes to tell HMRC about the schemes they've invented with a week of inventing them, so the government gets the chance to close the loopholes before the promoters have a chance to flog them.

And let's not forget the General Anti-Abuse Rule consultation, which closes in September. The government has said categorically that the GAAR will be enacted in the next Finance Bill. The Treasury issued draft legislation with the consultation. It basically said that anyone enters into a transaction which a reasonable person wouldn't think was reasonable then the tax advantage of that transaction gets set aside. That's a very powerful tool to stop avoidance.

Hardly nothing.

And even if HMRC was doing nothing, which is blatantly untrue, then it still wouldn't make tax evasion OK.

This is very funny - a cartoon.
www.accountancyage.com/aa/blog-post/2194159/colin-hmrc-moral-dilemma

You copied this word for word from another poster from another forum. Have you no original thoughts in that tiny, twisted mind?

Yes, I was wondering that, too, DH.

The OP.

Yes, it is the OP.

It's immoral to pay somebody cash so that they can avoid tax.

It isn't immoral to pay somebody cash so that they have quicker access to cleared funds.

On the other hand, it's my impression that with the wonders of modern technology, on-line transfers from personal bank accounts move quite quickly these days and many small traders are happy with this form of payment. This doesn't work so well if you are paying a hairdresser though - more relevant for a job that will go on for a couple of days so that trader can wait for payment before starting/finishing.

How much do banks charge for those mobile card payment thingy's?...

Isn't it quite expensive?

Tax avoidnce is morally right. The state spends money badly. The more you retain trhough sensible tax avoidance the more you should be patted on the back particularly by a conservative administration. People spend their money better on their families and charitable causes than the state ever does.

Tax evasion is morally and legally wrong. It is all very very simple.

However paying cash in hand eg for a very large job where you know it is being done to ensure teh trader does not pay tax is encouraging his crime so it is different from a lawful tax avoidance scheme or using your pension tax allowance. If your cleaner has no bank account (very common) and is self employed it is perfectly legal to pay cash.

Xenia, it is NOT common now to have no bank account, that's bollocks.

Your cleaner is just trying to avoid paying tax.

I managed to get a basic bank account to get my benefits paid into, when I don't hold ANY photographic ID. There are Post Office accounts too.

I don't know of ANYONE over the age of 18 without some form of bank account.

When will you stop posting such claptrap and do some research before you post?!

Merry mouse, yes those card readers are expensive, but Internet bank transfers are instant. Easily possible to be got around. Even telephone bank transfers are instant now. My friend transferred the £10 she owed me to my account by telephone, and it was there for me to take out of the cashpoint in the 5 minutes it took me to get there.

DH is regularly asked (on the whole by his wealthier clients!) "how much will you charge for cash" - as it all goes through the books WHY would "cash" make a job cheaper - it seriously P*s us off

I also know of a builder who, upon giving his "cash" price was told by the client "I work for the tax office"

I didn't say I had a cleaner and if I had one how I paid her but in our area there are hosts of immigrants and bankrupts and even had lunch with a man who was a bankrupt. He has to pay cash for everything. I met another at one of the London clubs one to do with the arts and he has to pay cash for everything due to bankruptcy and difficulty in getting a bank account. Also if the amount is very small as it might be if you pay the teenage babysitter £6 or if it is very very clear as it is with many many small traders they earn under the annual tax allowance of course the sum is tax free. It's a huge amount now you need to earn before you pay tax - nearly £9k.

Countless mumsnetters will NOT be tax payers.

Anyway my point was legal tax avoidance is fine and not unlawful as we all know. However encouraging people to evade is in a different category and if you are doing that then you are not a lawful Jimm Carr you are heloping a criminal.

Avoidance lawful and morally right.

Evasion criminal and can land you in jail.

I have sometimes been paid in cash although very rare and it just went straight through the books, the cash sum they paid included the VAT and they were handed a receipted VAT invoice. Cash is not illegal.