Remember David Gauke? The Government ‘spokesman’ that said people who pay tradesman cash in hand are morally wrong and cost the Treasury £2bn a year? Well the GGF Group Chief Executive Nigel Rees has now commented on the matter:
The GGF has responded to recent comments made by David Gauke MP who criticised cash in hand payments made to tradesmen. Mr Gauke, the Exchequer Secretary to the Treasury, said: “Getting a discount with your plumber by paying cash in hand is something that is a big cost to the Revenue and means others have to pay more in tax. I think it is morally wrong. It is not illegal for the plumber but it is pretty implicit in those circumstances that there is a reason why there is a discount for cash. That is a large part of the hidden economy.”
Upon hearing the Mr Gauke’s remarks, Nigel Rees, GGF Group Chief Executive said, “Paying a tradesman or company cash in hand is a fully acceptable method of payment if the tradesman or company is paying the taxes. With bank charges and credit card charges increasing and the banks trying to remove the cheque system, it is inevitable more people will prefer to pay cash. However, a homeowner paying a tradesman or company cash does not equate to the tradesman or company not paying tax.”
According to a report by the Public Accounts Committee, more than two million people make cash-in-hand payments costing the Treasury an estimated £2 billion. There is no law against paying someone in cash, but tradesmen are under a legal obligation to disclose their earnings to HMRC and say whether they are liable for income tax or VAT.
Nigel Rees continued, “Perhaps if the Treasury cut the VAT on maintenance and home improvement work from 20% to 5% rating, then homeowners might not be tempted to pay cash and companies could be less inclined to offer cash payment discounts. In addition to the current unfair VAT issues, the incoming Consequential Improvements within Building Regulations 2013 will add a further 10% surcharge on a homeowner’s bill for building work, which could see the informal economy growing even more as a result.”
HMRC is planning an amnesty to encourage cash-in-hand builders and general tradesmen to pay their fair share of tax. Under the amnesty, workmen who admit they have avoided tax will face reduced penalties of £200 plus a fine equivalent to 10 per cent of unpaid tax.
Anyone refusing the “last chance” offer will face criminal prosecution if they are subsequently found not to have paid what they owe.
Previous similar operations have targeted home tutors and eBay traders, and have pulled in an extra £500 million in tax since 2007.
So, clearly the GGF stands with the rest of us in condemning these ridiculous comments by David Gauke. But they also make a good point when Nigel Rees explains that paying someone in cash is perfectly fine, so long as the business is paying their taxes which are rightly due. Also, the point about 5% VAT was raised again, though I doubt that the Government at this point in time is going to take much notice of that.
I hope in the future that if any other Government spokesmen/women decide they want to wade into the issues of payment methods, they get their facts and perceptions of the general public correct.
To be fair to David Gauke, he was I am sure, referring to those who know they are giving cash to someone because they are not going to declare the job for tax. These people are a curse to us all who pay our taxes, because it means all us honest folk have to pay more. We all know of situations where the customer asks “how much for cash?” It is obvious why they are asking that question! There is no doubt that VAT @ 20% is a big incentive to evade taxation, but it isn’t going to come down… Read more »
Fair enough comments from the GGF but I disagree with Antony Jones of the National Fedration of Glaziers about Gauke. If he’s minister he has to be careful not to generalise. So instead of making a sweeping statement he should have qualified it, all he’s done is put the boot into tradesmen who often need to operate cash in hand so they can afford to buy materials for the job. Just because its cash doesn’t make it immoral. Loads of businesses offer discounts if something is paid for up front. As for the VAT situation I can’t see it changing… Read more »
Paying cash shouldn’t really be a problem as it is a recognised form of payment.
I can’t see the advantage to the homeowner paying cash .As surely this means any guarantee flys out the window so to speak as no proof of payment would be provided
For the tradesman the advantage is better cash flow.ie. no waiting for the cheque to clear or bounce.
Although the minister didn’t mean paying cash was wrong but paying no tax on earnings obviously is.