Paying tradesman cash in hand?

[Richtea67]

Hi all, our builder has offered a £500 discount on some work (£4000 instead or £4500), if we pay cash. I normally prefer the security of paying via bank transfer, but we're on a budget and this discount would make a massive difference. The builder seems legit, we've had recommendations and have gone to view previous jobs, checked out companies house details etc. The work comes with 5 year guarantee. Does this sound OK? Or would you be wary?

What do you class a risk?

Vat is £700, so he's not even giving her all the VAT back. Maybe he's not VAT registered though.

Tradies are earning a hell of a lot of money at the moment and need to be paying all taxes due.

Cut off for VAT is £90,000

Anything going wrong during the build or afterwards where you would normally rely on them to make right or on their insurance. Much easier for them to deny anything/everything if there is no paper trail.

Most people are on the up-and-up, but even then things can go wrong - better to be safe with larger sums of money in my view.

I pay my cleaner cash in hand. I would pay for a small job like fix a new tap. Not larger jobs you require a guarantee for. No paperwork no guarantee.

HMRC really need to start clamping down on all this undeclared cash in hand work - the black economy is costing tens of billions.

The problem is that from a consumer perspective there is often little benefit to helping compliance.

If the government started some sort of scheme, where each job could be registered and special courts were in place to address any issues as a result of bad jobs/guarantees then it would probably dis incentivise consumers to assist with it. Or an escrow scheme. People of course couldn't be forced to use the scheme, but if it existed then a significant proportion would for the protection it offers.

Any scheme would require a lot of thought in order to stop it being circumvented. But it would be better than the complete wild west that exists at the moment.

This is an instance where the government could actually intervene to improve the tax take and also improve the consumer experience. Instead it does nothing.

I see what you mean. I wasn’t sure if you meant a risk of paying tax or not

Why wouldn't you pursue dodgy work through the court however you paid?, you only have to prove they did the work

More likely he overpriced in the first place

Because it’s time consuming and anxiety inducing, potentially costs you money and no guarantee of success. The vast majority of people won’t and don’t.

And this is why a tradie who turns up when he says he will, does the job he said he would, to the specified standard, however he takes his pay, is worth his weight in gold…once you find ‘em never let them go.

I think they try but it is so utterly vast and now the norm that it is impossible. Hence why my previous post that the Laffer curve, the point at which no government can extract more tax without vast effort has been exceeded. Reeves has now learnt this with the super rich non doms. Great politics to the Labour base (what remains of it) but the idiot has now found she is getting far less in the coffers than before and hence why she is quietly trying to adjust the rules to persuade them to stay and pay tax in the U.K. rather than all the other places that they would prefer not to live at but will do.

it is happening everyday in the workplace especially the public sector. Senior nurses and police constables are now being taxed at 40%. So they end up paying 40% tax, 2%NI, 9% student loan, 9-11% pension. That is 60% and if they earn more and lose child benefit the tax rate is another 20%. So 80%. What are many doing? Reducing their hours which is a farce as we need them and frankly managing reduced hours in some jobs is a nightmare. At the bottom end, those who get some degree of universal credit are doing the same

Modern mobility is so different and now people of reasonably affluent means are doing it. We have several friends that have decamped out to places like Dubai to do a few years and save all the tax although at some point the intention is to return, although it seems some stay far longer than they intended.

@Sunflowergirl1

I think they try but it is so utterly vast and now the norm that it is impossible.

No, I don't think they even try anymore. As an accountant, I'm legally required to make "suspicious activity reports" for illegal activities, such as tax evasion, and in the 20+ years that regime has been in place, I've made a few dozen such reports, usually highly detailed with reasons, evidence, etc., so basically VERY easy for HMRC to investigate. Out of those few dozen reports, not a single one has led to any kind of enquiry/investigation that I know of. It's just a statistic gathering exercise. On courses I've been to, lots of other accountants have said the same. Very difficult to find any who've had any kind of response/action from such a report. And let's not forget, these are the EASY cases where lots of detail has been given to HMRC, but they still choose not to take action.

Brown really screwed things up with all his reorganisations and amalgamations of the tax offices etc., added in to giving HMRC responsibility of state benefits such as his stupid tax credits, which soaked up massive amounts of HMRC manpower, not to mention lots of fiddling around making the tax system even more complex. Huge numbers of experienced tax inspectors were made redundant and replaced with poorly trained call centre workers.

But, as you say, tax evasion, benefit fraud, illegal working and the black economy in general is now so utterly vast, it's hard to see how anyone can turn it around, but it's still getting worse, so someone should at least try.

What's more annoying is that you get an automatic £100 fine if you are a day late with your tax return, which HMRC DO pursue you for, but if you're a "too difficult" case, like a rogue tradesmen doing VAT free cash in hand work, they are too lazy to bother investigating and challenging! Those engaged in tax evasion know that they are basically free to get away with it as long as they put "something" in their tax return and submit it on time.

I don't think it is just about tax evasion though.

Consumer protection from trades is appalling. The whole sector is rife with shoddy operators, overcharging, scams and fraud and poor documentation with very little comeback for customers.

It's getting to the state where noone can actually get work done because there is noone around they actually trust. Hence the rise of "check" organisations which provide at least some background, but really this stuff should be done as part of a government framework. It's what people pay their taxes for.

The government is there to protect the general public and enact laws to their benefit. In clearing up the whole sector the government not only gets to deal with tax evasion, it also gets to protect consumer rights, which is surely the biggest motivation for actually reforming it.

Customers at the moment might facilitate tax evasion (even if they aren't an actual party to it) because there is little benefit to them not to. Give them a solid benefit as to why they should not facilitate it (ie register the job, get a government enforced guarantee) and they suddenly have a strong reason why.

Some customers and traders will always choose to operate outside any government/legal framework that is in place, but then that will be at their own risk.

Trouble is the "regulated" sections such as gas and electricity are still full of chancers/incompetents too! So even regulation doesn't necessarily improve the quality/competence.

I've had two GasSafe approved tradies who've screwed up installations dangerously, and reported both to GasSafe, but nothing was done. One was a botched gas fire installation where fumes weren't properly vented out as the installer couldn't be bothered to read the instruction manual. We had him back several times, but he kept repeating that it was just the artificial coal "burning off", so we ended up calling out an engineer from the manufacturer who condemned the fitting and disconnected it as it had been assembled incorrectly!

Second time was a new gas boiler installation. He heating engineer fitted it and buggered off really quickly saying it was "all done". It kept cutting out and he refused to return citing it wasn't his problem as he'd done it all right and just glibly told us to contact the manufacturer under the warranty. We did, they came out and, again, condemned the fitting and disconnected it. The engineer showed us the installation manual where our engineer hadn't filled anything in - apparently all kinds of readings need to be taken and noted down on the installation check list and he'd done none of it!

You'd think that GasSafe would take reports seriously of this kind of shoddy/incompetent work, but they seem to just ignore them. Another "toothless" regulator!

Do not pay cash. It facilitates tax evasion and makes it much more difficult if you have a dispute afterwards

I am sure the regulators are not perfect.

But maybe better than nothing.

And once you have the infrastructure in place, you can choose to improve it.

Putting it in place in the first instance is the difficulty.

I agree. Many other countries have far better checks on small businesses generally, i.e. in some countries, anyone starting any kind of small businesses needs to get some kind of regulatory approval before they're allowed to start, even for generic trades like cleaning or handyman or shops etc. I think we're far too soft in the UK generally as anyone can set up a limited company for a few pounds which seems to make customers think they're legitimate when actually Companies House barely enforce anything - lots of people proudly declaring they're a company director which basically means nothing more than they've paid a few pounds to form their own limited company!

Not all builders are vat registered. There is no law to say builders cant take cash. So long as they declare it - you do not know what they are doing. My husband is a builder, not vat registered but he pays his taxes every year and sometimes takes cash which he declares. Please don't tar them with the same brush.

There is no law against taking cash, so long as its declared. My husband declares his and gives solid guarantees with his work. Not all builders are crooks.

Does your husband offer 20% off for cash? No thought not!

Ignore the self righteous posters on here.

How other people manage their businesses isn’t my problem. I will pay the amount that suits me, and if paying cash means I save money then it’s on him to declare it, if he doesn’t then that’s on him as well.

As long as you get a receipt for the job it’s fine.

I imagine these are the same types who positively encourage benefit fraud on here and always discourage others from reporting because “you don’t know the circumstances.”

20% of 4500 is 900. Do your sums.

I know several people who have done major building works and paid cash - this is almost 200K+. Not sure i could do to this level but i have known builders and paid them directly for up to £20K for projects. I wouldnt always do this but i knew them and their work.