A new report has claimed that those who pay cash-in-hand for tradesmen are not “good citizens”.
Prime Minister Theresa May commissioned the report, which examined the number of cash-in-hand payments and the so called ‘gig economy’.
It is a well known fact that many of us have been offered the chance to pay our tradesmen in cash, typically in exchange for a price reduction. This usually removes any kind of paper trail, which can leave customers vulnerable if the work turns out to be sub par.
However, new findings place a portion of the blame for this on the customers themselves. Matthew Taylor, who carried out the report, said that it is “unfair” to intentionally and knowingly hire tradesmen who undercut their competition with low prices and often avoid paying tax.
According to Taylor, Tony Blair’s former policy chief, over £6bn in tax is lost every year as a result of cash-in-hand payments for jobs like decorating and window cleaning. The report urged ministers to move closer towards a cashless society in order to encourage “the right choices.”
"In a few years time as we move to a more cashless economy, self employed people would be paid cashlessly - like your window cleaner,” said Mr Taylor. “At the same time they can pay taxes and save for their pension.
"Most people who do pay for self-employed labour would like to know that that person is paying their taxes."
Although Theresa May has distanced herself from the findings, a Downing Street spokesperson said: “We need to make sure we are at the forefront of all the technology and innovation around making it easier to pay for things. But at the same time many people prefer to pay cash-in-hand and that is a legitimate way of paying for goods and services.”
‘Legitimate’ is a bit of a tricky word when it comes to this topic. Yes, paying for goods and services with cash is perfectly legal. However, doing so can leave customers vulnerable. If you pay a tradesman in cash, it can be impossible to hold them accountable for their work, whether it gets completed or not. Many tradesmen also ask to be paid in cash to avoid having to pay VAT on their earnings, which amounts to tax fraud.
Addressing this, Mr Taylor acknowledged that it could come across as “intrusive” to expect tradesmen and homeowners to keep records of all their transactions. He expressed the need for a “clearer audit trail”, however.
“This can help to change the behaviour of those individuals who are non-compliant as a result of inertia rather than through conscious choice,” the report continued. “It can also support consumers in making the right choices.”
Mr Taylor also addressed migrant workers, claiming that they should be forbidden from working on a cash-in-hand basis or be made to carry a work permit showing that they are capable of taking electronic payments for their services.
“Cash-in-hand payments are often made to avoid tax, it’s quite clear,” said Labour leader Jeremy Corbyn. “Many businesses benefit from it, individuals benefit from it.
“Obviously it is wrong. If there is a tax to be paid – VAT or whatever – then it should be paid, and cash-in-hand obviously avoids that. I want to see it phased out.”