Paying a tradesman in cash (no VAT)

[ThatBeachLyfe]

Our floor guy has suggested this as a way of saving some cash. We've used him before so trust him but DH nervous about potential tax evasion. Everything I've read online seems to suggest the onus is on the tradesman to declare the job, not on us but advice welcome.

It doesn’t matter how you pay him, he is responsible for putting it through his books and paying the VAT if he is registered.

Are you saying VAT when you mean income tax ?
Regardless it’s none of your concern how he does his accounting.

Will he give you a bill? If the work is faulty in any way, without proof of payment you have no legal recourse

If you want to benefit from his (and your) tax evasion, then crack on. But don't pretend and sugar coat it to be anything else. The black economy costs the UK tens of billions in tax evasion, benefit fraud, etc. Personally, I want no part of that, but you do you!

Just remember it's not just you saving 20% VAT - he won't be declaring it, so he's saving 20% income, plus 9% NIC, so he gains more than you from defrauding the taxman. Don't let him con you into thinking he's doing you a favour - he's doing himself a bigger favour!

I'd say 'happy to pay in cash but we will still want an official invoice for our records'.

Personally I wouldn't use someone who openly talked about avoiding VAT.

But you’re not the ones evading the tax. He is. You’re just paying him what he asks for to do the job and what he does with his accounting is not your problem.

Only tradesmen earning over 80 grand pay VAT, if he's a one man band he probably doesn't.

Fairly sure my friends ex (also in trade with a seeming lucrative business ) got out of paying fair child maintenance for his kids this way.
That said, it is on him, not you

I’ve no problem paying in cash, if they dodge paying taxes that’s on them.

The method of payment is less relevant, it’s a matter of accounting and whether or not he is properly declaring his taxes

Did you get invoiced for the previous work?
Is he VAT registered?
Who is paying for materials?

If he gives you an invoice then he is accounting for the job
If he is VAT registered then he accounts for VAT on the invoice and in his tax return
If he is buying materials then he needs to account for the purchase, unless he is using leftover materials billed to another job, or buying them with your cash and either giving you the receipt or hiding the accounting
If you are buying the matériels then he is not accounting for them

(If using you to buy the materials it can keep his turnover down below the VAT threshold and therefore would not be paying VAT to HMRC, nor deducting expenses from VAT - this can be a valid way to keep costs down meaning he still owes income tax etc but not the extra on top of his bill enabling him to stay a little cheaper)

With a level of cash he may be reducing his business banking charges, provided that he does not need to bank that cash - which may be legitimate or may be out of the books

Love how people get all worked up about a tradesman who might not be declaring all his income in order to avoid a few grand in tax ever year, but think nothing of the huge corporations that avoid paying hundreds of millions in tax.

Yeah, Big Daves Flooring Ltd is going to save the NHS and pay for the thirty thousand extra Police officers we need.

OP, you have no idea what your guy is or isn't declaring, and it's none of your business.

This is the sort of mentality that takes hold in “banana republic” and then everything goes downhill. Don’t then complain about fraud, bribery and corruption taking place.

Yes big corporations should pay, but if everyone followed your philosophy, how do you expect public services to be paid for?

Turnover - not profit - they are very different things.

@NoBiscuitsLeftInMyTin I know, but the point is a lot of sole traders aren't VAT registered.

I would think that most builders would have a turnover of over 80k given the cost of materials, and the average cost of having work done.
If they weren't vat registered, then surely the method of payment wouldn't matter?

I won’t pay in cash as I despise the black economy.
I hate big business and small traders evading tax.
Because every nail bar, trades person, cleaner etc whilst as an individual may be a few hundred or thousand a year added up it is billions in lost revenue as well.

Two wrongs don't make a right. We need to be tackling both. But realistically, we're limited as to what we can do about tax laws in other countries that allow for things like charging royalties to a UK subsidiary to reduce profits by a head office the Cayman Islands!

There are international efforts to tackle it, but short of invading an Island or compensating them to the tune of billions, you can't "enforce" our tax laws onto them as the financial services industry is often the only industry in tax havens!

In the meantime, what we CAN challenge is the tens of billions lost IN the UK TO UK residents who are in the black economy, fiddling their taxes, engaging in benefit fraud, probably also child maintenance fraud, plus everything else in the black economy, i.e. modern slavery, money laundering, etc - all of which the people involved are swimming in the same swamp!

Likewise. If a trader "offers", then they're straight off the list of potentials and I won't be phoning them back! If they're happy to break the law re tax, they'll probably be breaking other laws too, i.e. shoddy work, employing labourers "off the books", maybe no insurance, or even just not having road tax or MOT for their vans. If people are having to engage in "low level" crimes in one respect, they're probably at it in other ways too. The slippery slope!

These days, tradesmen etc even offer "cash" and VAT free discounts when you phone them and they've not even met you. It's rampant. I've had it from local fencing replacement firms, shed roof replacements, etc - where they can give you prices over the phone, and then the "nudge nudge wink wink" 20% off if you pay the guy in cash when he comes to do the work!

We really need to challenge it as it's grossly unfair to people like care workers, shop workers, etc who are paying taxes on minimum wages and don't have the same opportunity to fiddle their taxes etc when their wages are paid through legal/legitimate declarations.

I don't think you'll get caught for the tax evasion, but you're definitely supporting it. It depends how you feel about that.

I don't pay anyone without a proper invoice and receiptfor my own protection, which usually, when people want cash to "save" tax, they cant/won't provide.

I think the only bit that tugs on me is the number of self employed men who do this then declare how little they earn to reduce child maintenance

but that’s quite a niche fret

I'm always happy to pay in cash if that's what they want what they choose to do after the is none of my concern

That is a niche fret that DWP share, and we’re finalists in the 2022-2023 civil service data challenge

They were developing processes and data sharing with HMRC focused on the self employed to streamline processes (speed up those who want to pay the right amount as circumstances change, and free up time for looking further into the details to better flag those ‘self employed’ who don’t make ‘enough’ to pay their child maintenance

https://cddo.blog.gov.uk/2023/03/21/civil-service-data-challenge-finalists-child-maintenance-datasets-to-improve-compliance/#:~:text=The%20idea,Maintenance%20agents%20need%20that%20information.

We had one day to us ‘it’s X amount. If you don’t want to in cash, you pay X+ 20% to cover the VAT’ and he was so calm and brazen. I was so surprised. I’ve had the ‘a little bit less if you pay cash nudge nudge wink wink’ and similar things but nothing as bold as this. It made me wonder if that’s how he genuinely believed it works. Like maybe that’s how he was taught.

Same with me, I’ve paid for the job to be done and comfortable with that. I find cash easier.

Whether they are honest with it afterwards is on them and not my concern at all.

@HelpMeGetThrough @feelingbleh I feel the same..it's up to him how he runs his business, and we've used him before, (though he was in partnership with someone else who we paid via invoice, and now he's working independently) so trust his ability to do the job.