Paying tradesmen cash in hand is a common, convenient, and long-standing form of working. However, the government loses an estimated £2bn every year to this practice. Is it as bad a practice as it's being painted? Read on to find out.
Cash In Hand Payments
Paying tradesmen cash in hand means paying for a completed job without calculating tax. For example, if you install a new tap in someone’s bathroom, they could pay you £100 cash in hand, and you would go home with that amount in your pocket. A parent company might also do this, classifying its employees as freelancers and leaving them to sort out tax on their income alone.
This can easily lead to abuses of the system. It is much simpler, and illegal, to pocket the payments and therefore avoid taxation. Fortunately, not every graduate from plumbing courses or electrician courses works in this way. A great number of those who accept cash in hand payments are scrupulous and honest about their earnings.
However, there are tradesmen who offer ‘discounts’ for cash in hand payments, and they are an area of concern for the government. Paying tradesmen cash in hand has also been a legal method of payment for a long time now, particularly for freelance tradesmen who aren’t employed by a parent company. It is therefore difficult to police this particular issue.
For those tradespeople who manage payment in this way, the arrangement is beneficial both for themselves and for their clients. The taxpayer’s money it would take to tackle the minority who operate in this way would far exceed the gains to be made by ensuring every single transaction is fairly taxed.
Corporate tax evasion is also, arguably, a far greater issue facing the UK’s economy. No corporations have been punished for tax evasion by HMRC since the Corporate Criminal Offence was introduced nearly six years ago. A corporation is likely to owe a lot more in tax than a single freelance tradesperson or construction company that may only owe a few thousand pounds.
Are you a graduate from our plumbing courses, electricians’ courses or other types of trades training? What’s your preferred form of payment? Do you accept cash in hand? We’d love to hear from you on this subject.
If you are considering enrolling on plumbing courses or electrician courses, Access will help train you in all areas of your trade. From hands-on technical work, to running your business and working out tax - for flexible, thorough trades training courses, across the UK, contact Access today on 0800 345 7492.