Big Brother is watching but what can be seen?
In his latest UK200Group blog post, Jonathan Russell of member firm ReesRussell, discusses the possible reasoning behind paying in cash.
It was interesting to see the report done by Matthew Taylor into employment practices in the modern economy; reported mainly for comments on the ‘Gig’ economy. However, the point that I found most interesting was his comments about cash payments and the cash economy. He was suggesting that it should be an offence to pay someone in cash!
Now we are all aware of people who may prefer to be paid in cash in order to avoid taxes of one sort or another. Generally, there is the customer who is trying to get something cheaper and probably avoiding VAT and equally the business trying to have something which may not appear in their books and therefore not declared for tax. But equally well it may be a convenience that cash is used, because it saves waiting for bank clearance for instance, and there is no intention of defrauding anyone. An individual might be going to buy a second-hand car and takes cash along so a deal can be done there and then. But Taylor suggests all payments must be made through bank accounts so they can be traced and this will enable HMRC to identify some of the suggested tax shortfall.
But there is also a practical side to cash both from the business and the consumer. From the business point of view, it can be a simple cost as most transactions for a small business if done using a card machine will cost 2.5% of the transaction and that is before they worry about card fraud etc. I didn’t see the report suggesting a free of charge system. There are also many times when cards simply don’t work – the rural shows where the mobile signals are simply not there or overloaded.
Also, there are reasons why the consumer likes to use cash, it might be that it enables them to better monitor their expenditure or they simply have a poor credit rating or their cards are maxed out! There can be, of course, more interesting reasons, nothing to do with tax, but relationships where one party may not want to be leaving a record of what money has been spent on! Many businesses at the moment are actually seeing the proportion of cash payments they are receiving going up and that has nothing to do with tax evasion.
The Taylor report made many interesting comments and suggestions, as regards, employment but to me it was the comments regarding the use of cash that concerned me the most. There was an inference that it was presumed that if every transaction was done electronically not only would it be recorded but also that HMRC and other Government departments would have access to the detail. This is potentially a step that many of us watching Making Tax Digital have feared – an ability and a right for HMRC to have available to them access to the core underlying data of every person’s and businesses data.
My hairdresser only accepts cash and I willingly hand over my money without any thought that it will not be declared for tax purposes as they are in High Street premises for everyone to see. Just because we handle cash doesn’t make us dishonest.
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