working cash in hand / off the books

[bumpybecky]

A friend has been offered a job working cash in hand for a local company. He doesn't want to work illegally, but wants to come off benefits.

If he does get caught out by HMRC, who is liable for the tax and NI? is it the company or the employee? and how will they prove how much he earnt / owes?

Would it be better to declare himself as self employed (even though he isn't!) and put it through offical channels that way? at least then he could make a fair claim for tax credits as he'd be able to declare what he was earning.

This is a very risky business to get into.

If HMRC find out about the earnings, they will look to charge tax. They will go to the employer first (as he will have defaulted on his obligation to PAYE), but the primary responsibility will still be your friend's. He could have the tax and NI bill. They could trace payments from the firm to him to work out what is owed.

As you say, he would also be giving false information to tax credits.

I wouldn't recommend trying to declare himself self employed, not least because the tax levels are different.

He'd also be doing himself out of the employer's NI contributions that he would earn by working under proper PAYE terms.

The company is liable.

He couldn't declare himself as self-employed, because he wouldn't actually be self-employed - it's not something you can decide on, and if the nature of the relationship between him and the company is an employment relationship, which I imagine it is, then self-employment isn't really an option anyway.

I would strongly advise against working for any company who wants to do this. Obviously it's illegal from their point of view, but if they're prepared to break the law in this way, there might be lots of other rights your friend has that they might try and ignore, such as holiday, sick pay, protection against unfair dismissal, redundancy later on, all sorts of things.

I've said the company is liable, and I believe they are, but if Ribena says they might also come after your friend directly I'm sure that's correct.

Flowery - my understanding is that the individual will always be liable (because it is his tax, IYSWIM), but that HMRC always go after the employer under failure to operate PAYE because of deeper pockets/greater inclination to cooperate. Would be happy to be proved wrong...

thanks both of you

will have a chat later in the week and see what he's planning. He really wants to come of benefits, this is the first job that's been offered in 6 months. I'm really shocked too knowing the organisation invloved, you just wouldn't expect dodgy stuff like this.

Ribena that makes perfect sense to me

Becky hope things go well with your friend, it must be so difficult having had no other offers but my own opinion is that it's really not worth it tbh.