Well of course there bloody isn\’t

There is no law against paying someone in cash

It\’s known as \”legal tender\” for a reason.

Dear God, you pay at the supermarket in cash, at the market stall, at the chippie, at the pub. You doing the paying are just fine. It\’s up to the recipient to make sure they pay the appropriate tax on the money they receive.

23 thoughts on “Well of course there bloody isn\’t”

  1. Offshore Observer

    Absolutely correct. Also there are many reasons why business often give a discount for cash, not simply evading VAT. Firstly, Cash payments are immediate, you don’t have to wait three days for the cheque to clear, nor have concern about the cheque bouncing and it becoming a bad debt. You can also avoid the fees charged by credit card companies.

    So some firms quite legitimately give a discount for cash payment because it improves thier cash flow.

    The other thing that seems to be forgotten is that if a tradesman does give a discount and does not charge VAT then he cannot claim the input tax credit on any materials he may have supplied. That means he bears the VAT on anything he might purchase and not the ultimate customer.

    In addition when he or she spends the cash, as will inevitably happen there will be VAT on the goods and services purchased.

    The beauty of VAT is that while there are opportunties to evade the tax due to the nature of the economy the transaction will get taxed somewhere. The black economy will still exist but there will be revenue generate elsewhere in the economy.

    Still it makes for good copy I suppose.

  2. Paying in cash is of course totally legal. Being presented with a bill and asking for a revised one ‘for cash’ is being complicit in tax evasion. Ethically speaking I would say the householder who asks for a discount for cash and doesn’t receive a receipt/invoice, especially if the bill contains VAT, is as guilty of evading tax as the supplier of goods and services is.

    We all know what ‘Any discount for cash?’ means. And if we ask it we are part of the act of tax evasion, ethically if not legally.

    Whether such behaviour is morally wrong is another issue, but lets not pretend people who pay cash to builders, plumbers and odd job men are whiter than white.

  3. Exactly

    But that is why some would happily do away with it. Thye start is already being made with Italy and Spain trying to limit the amounts that can be paid in cash. Stupid ‘cos it’s legal tender.

    Tim, In Portugal it is probably the same. You buy a house for 100, sign deeds for 80 and then the Notary says, ‘well I’ll go and see to the printing of the paperwork. I’ll take about 15 minutes.’ Just time for you to whip out the 20 missing monetary units, count them and hand them over.

    And that despite the Notary being obliged by law to ‘denounce’ if he ‘suspects’ a ‘black’ payment is being made.

    I recently sold an apartment on behalf of my widowed mother-in-law. I couldn’t find a buyer who would pay by cheque the selling price. Part had to be in cash and not reflected in the contract.

  4. I’d take the position that it’s generally moral to avoid and evade tax, for the same reason why it’s moral not to give heroin to a smack-head.

  5. Let me see if I’ve got this right:

    A man who demands a portion of the fruit of your labour, under threat of punishment by him and his colleagues for failure to comply, claims that people who in some small way fail (refuse) to comply are bad people.

    And, it follows from this, the man who demands a portion of the fruit of your labour, under threat of punishment etc., is a good man.

    Such a man is not a criminal, in a criminal gang or conspiracy. You are a criminal.

    Have I got that right?

  6. “Whether such behaviour is morally wrong is another issue, but lets not pretend people who pay cash to builders, plumbers and odd job men are whiter than white.”

    Probably just a bid stupid since they’d be unable to enforce any warranty on faulty materials or workmanship.

  7. @ Offshore Observer

    “The other thing that seems to be forgotten is that if a tradesman does give a discount and does not charge VAT then he cannot claim the input tax credit on any materials he may have supplied.”

    I think it is fairly safe to assume that someone who is comfortable fiddling the output section of his VAT return will be equally comfortable fiddling the input section.

    We can also take a brave leap of faith and assume that the person not declaring income for VAT will also not be declaring it for income tax.

  8. Good luck to all “fiddlers”. As somebody(Lysander Spooner)said–“Whoever gives money to the state puts a sword into the hands of his most greedy and most vicious adversery”

  9. @ The Thought Gang

    “I think it is fairly safe to assume that someone who is comfortable fiddling the output section of his VAT return will be equally comfortable fiddling the input section.”

    That’s entirely the point of VAT, it’s double-reported. If I report paying more for my inputs then it will show up when cross-checked against the records of whoever sold it to me (who of course has an incentive to massage the figures in the opposite direction).

    Although I’m surprised no-one has pointed out the incorrect usage of “legal tender” yet. Legal tender cannot be refused for payments INTO COURT, nowhere else.

    http://www.hodderslawonline.co.uk/but-its-legal-tender-isnt-it/

  10. Some tradesmen prefer small bills to be paid in cash to avoid bank charges – a major burden on small businesses – rather than to avoid tax and provide a receipt. Many self-employed tradesmen are exempted from VAT by HMRC who set a threshold below which they don’t need to register. If someone offers me a discount for cash I pay by cheque, otherwise I pay by whichever means seems most sensible.

  11. “We all know what ‘Any discount for cash?’ means. And if we ask it we are part of the act of tax evasion, ethically if not legally. ”

    Nope. If you ask it of a plumber, with a leer, then perhaps, but even then it’s up to him and not you. But if you pay by any other means it means the money sitting around in someone other than the goods/service provider’s account for a good few days. Maybe they need a better cashflow (as noted above). Maybe they don’t like the idea of the money being in your account and not theirs for three-five days *at best*. Maybe their working schedule doesn’t allow them to get to a bank within normal banking hours and would like the money now rather than a week next thursday when they finally have time to go to the bank. Or maybe, in this benighted world, they would like the guarantee that they are going to get paid; which is only ever solid when they are holding the folding.

    You can be as render-unto-caesar as you like and there are still a number of ‘morally legitimate’ reasons to pay cash. Of course, if you take the position – pace O’Rourke – that “giving the government money is like giving whiskey and car keys to teenage boys” then it’s the only morally legitimate way to pay.

  12. The use of cash for small, legal businesses transactions is a really good example of market failure. It is cheaper for banks if companies use electronic payment for anything above penny change, and cheques never. But because electronic payment is new and banks are a thieving cartel, they have been able to charge businesses to reflect its greater convenience to them, despite the fact that it also saves them money.

  13. @ Richard Allan

    ““I think it is fairly safe to assume that someone who is comfortable fiddling the output section of his VAT return will be equally comfortable fiddling the input section.”

    Individual transactions aren’t double-reported at all. The only thing that goes on a VAT return is the total for any given period. Perhaps if a return is audited HMRC might go and check out the other side of a transaction.. but such checks are very much the exception.

    Anyhow.. the point here is not that Mr Dodgy is reporting more for his inputs than he paid.. it’s that he’s reporting the inputs accurately, but not the outputs that go with them. So he’s claiming the VAT back on the materials, but not charing it on to the consumer.

    Of course, there are limits to what he can do.. his returns will need to look sensible and survive basic scrutiny… but in trades where the key input is human labour (upon which no input VAT need be reclaimed) it’s entirely feasible to omit large portions of the due output tax, whilst still reclaiming all the input tax, and still having VAT accounts that look reasonable.

  14. Indeed.

    Also, in trades where the key input is human labour and the contractor is underreporting output, then he has a strong incentive to keep his declared wage bill low enough that it plausibly matches with declared revenues.

    Which is excellent news for both folks on benefits who like money, and illegal immigrants who like money. And also explains how black economy jobs can often pay just as well per hour as legit ones.

  15. Last time I went to Italy, they wanted the rent for the apartment in cash up front.

    Couple of million lire iirc.

    I am sure they paid their taxes on time and to the penny.

  16. @sam: the simple test is whether the tradesman will give you a receipt for cash. If so, he’s probably legit. In my business I demand payment in cash most of the time (due to the nature of the goods I can’t get them back once delivered). I always give a full receipt.

    But I would hazard a guess that most tradesmen who accept cash would not give a proper receipt, for the obvious reasons its going nowhere near their official accounts.

  17. It seems to me that if you pay someone a non-trivial sum in cash knowing that they plan to evade tax, you are guilty of aiding tax evasion. On the other hand, if they tell you they want the cash for some legitimate reason, you’re not legally obliged to investigate. IANAL.

  18. Paul B, your obligations to report on or prevent crimes are generally pretty limited. As I am a lawyer, I won’t be more specific than that.

  19. The media misquoted Gauke – and their misquotes were so widespread that I wonder if it was wilful. What Gauke actually said that offering a discount on a cash payment in the expectation that tax would not be paid is wrong. He did NOT say that payment in cash was wrong – or indeed that discounts on cash payments for other reasons (for example because of the clearing time on cheques) were wrong.

  20. @ Frances Coppo;a
    My reaction (remembering the deliberate misquotation of Sir Keith Joseph by the Daily Mirror in order to torpedo his campaign to replace Ted Heath as leader of the Conservative Party, which led to Mrs Thatcher becoming PM) is “almost certainly”.

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