Dilemma- using a builder who is offering a cash in hand deal?

[stoviesfortea]

We are planning on getting an extension to our house this year and have started looking about for quotes. One of the builders has come back with a price and he said that he could do it for cash ie, we don't need to pay any VAT (therefore saving ourselves about £10k) but I know this is dodgy from his side. My DH is an accountant and said there is nothing wrong from our end by paying him cash as it's up to the builder to declare his VAT.

Normally I would run a mile from a guy like this but DH knows this builder well, he went to school with him, was best mates with his brother at primary school, the builder has a great reputation for his work, he has completed several projects nearby and they have given him great references, he lives locally so is fully traceable, and he isn't asking for any cash up front so we would only pay him once stages of the work are completed. I think the builder has only suggested this cos he knows DH.

We are really tempted about the VAT saving but the only downside is that we aren't going to have an official formal contract as such, but the builder said he will still put in writing what is included / excluded and sign it. But it still feels a bit dodgy!

What would you do????

mrsticklemouse* the problem is, if they pay cash in hand, it is not being declared. A contract is written proof that the job was done, so most cash in hand payments are done with no evidence the job was ever done.

also cash in hand means no receipts, and it is usually paid in cash, to avoid showing on bank statements. With no receipts, even if there is a contract, it would be hard to prove what has and has not already been paid, how could you prove that?

Hijacking, slightly.

We've just had a builder come round to give us a quote on a single storey extension, who didn't use the words 'cash in hand' but did say 'ignore the VAT on the quote we give you'. He's the second quote we've had and comes recommended by friends of ours who are town planners and who kindly asked around at work for us. Their colleagues have had lots of work done by his team for them and been very pleased with it.

Thoughts?

I second everything Pavlov says. On the occasions my DP does cash jobs (usually small carpentry jobs and the client asks for it to be that way) then he'll only do so if he can issue a reciept and then he'll still use his trade accounts. He still passes on the VAT. The only bloke he's scared off is the VAT man!

Wobble - it's up to him if he doesn't want to charge you VAT - come back is on him. But - if it's at the expense of reciepts and not offering a formal contract then it just stinks IMHO! I'm assuming a single storey extension doesn't come cheap so I think you want as much protection as possible. You wouldn't buy a house without everything being water-tight and above board - so why make it more valuable without it all being legit?

I am no saint but why is no one mentioning here the ethics of tax dodging? It is fraud pure and simple, whether you are doing it yourself or condoning it in others. This is money which would be used for schools, hospitals, old folks heating etc. I can fully understand the temptation, yes, but ethically I think it is right to pay taxes. Poorer people than your builder will be paying their taxes, so why not him? In the same way I don't reommend that people shoplift, fare dodge, submit false annual reports etc or help other people to do it.
Plus what Pavlov says.

Very good point domesticslattern (hello btw ) i hadn't thought of it that way

I will probably get flamed for this but you cannot honestly believe that every builder asking for cash payments is dodgy?
If you trust him and are able to supervise the work you should be fine. There are plenty of ways to closely document the work should anything go wrong.

Honestly, I don't think I would think twice about it and would pay cash. The fraud thing is a non-sequiter, you won't be committing fraud, the builder will.

orange no, you cannot presume all builders are dodgy, but how do you know for sure that your builder is not? I for example checked my builder out as thoroughly as i could, including use of building control team as much as they were able to help. He was still dodgy and turns out probably the worst kind of bodger you could come across. So, if you are doing large amounts of work, it is necessary for all the paperwork to be above board, from your end, so you have traceable steps if you need to take further action. Also means, you have reason to feel the builder is trustworthy if they are doing it all by the book, especially if you are new to property development of any kind (small or large).

You just cannot have a large scale renovation done on your property based on trust alone, you just cannot take the chance.

i'd second what domesticslattern says - not paying the VAT is fraud, it deprives the government of income used to fund schools, hospitals and other essential things.

domesticslattern - yep, completely agree.

Again, I agree with Pavlov - if a builder has taken the time to be VAT registered and is water-tight in his books and the way he deals with clients (formal, individually tailored contracts to suit each client) then at least you can see there is a pride in the business and it's not slap-dash. It's annoying for us as we see really dodgy builders all the time (and loads of conservatory companies!) who place glossy ads - smooth talk and do everything off the books. We know this because DP so often goes round a year later and picks up the pieces.

Do you know why he's not charging VAT ?

We've got ourselves a builder who is not charging VAT but we have a very detailed contract attached to which is our architect plans, detailed schedule of works (this bit is really really important - it took us a very long time to sort this part out before finalising the contract price) and a payment schedule which we both sign when payments are passed over.

We pay some of the money direct to the sub-contractors which I think is where the VAT issue is probably dealt with This is the way the builder has always done it.

He isn't though, a friend although he was recommended to us by a work colleague of DH's and I had lengthy discussions with them about how it all worked. We're sometimes asked for cash to pay the men on a Friday but I'm not particularly bothered about that.

We are supplying all teh stuff such as Kitchen, bathroom, all windows and flooring.

Don't do anything without a contract and if he isn't keen on a contract then run a mile. I hate working for friends - i think it's very tricky when things get difficult and in order to save any friendship I'd shop around. A lot of builders will give you a deal at the moment.

I was fairly keen on one builder and then went to see the person who was having work done from him and I was told not to go near him - he was hopeless so when you do do your search make sure you follow up on references. You only get the true picture from people who've already experienced their work.