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30 July 2012
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 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 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.