Paying cash to avoid VAT; legal??

Haych

A small dilemma has presented itself to me. 

My car is currently in the body shop having some paint tidied up. The company doing the work are a well established local company and I have used them once before, and other members of my family have also used them. 

When I took the car round last week for a quote the chap told me it would be £450 for cash or if I wanted to pay by card or cheque I'd have to add 20% for the VAT. 

So, firstly is this legit? The guy has been running his business like this for years and I find it odd that he's never been caught if he's not declaring cash through his books but he always says it's an option. 

Is he fiddling cash through his books or have I misunderstood how VAT works?

Secondly, if I pay cash I won't receive an invoice or receipt for the work he's done and thus no warranty. If I need that down the line then I'm stuffed. 

While I don't wish to pay more than necessary the old adage "buy cheap, buy twice" seems to be constantly at the base of my skull. Also as I'm a conscientious kind of person I worry that if I agree to pay cash then I'm complicit in his book fiddling, if that's what he is actually doing. 

Neil

It's illegal and if HMRC found out they would have a field day.

Haych

Thanks @Neil, I thought as much. How has he never been done then, he's been doing this for over 20 odd years?!

Nikko

Hmmm naughty boy!  This has been offered to me in the past, but ive always gone down the route which gets me an invoice/receipt, so have paid the extra.

lloyd

It's the way of the world, I'm happy to pay cash to people I know (of) to do jobs I can't, car stuff is different especially if it's a car that's worth a few quid.

I've certainly got no moral issues with 

boogieman

Yup it's illegal. He probably gets round it by only declaring a percentage of the work he does to the taxman. The cash sales probably won't go through the books at all, just straight in his pocket. HRMC might get wise to it eventually, they have inspectors who concentrate solely on small businesses. 

It's a fairly common practice though, especially among builders. My mate had some work done on his house once and the builder offered him the cash/no Vat deal. That rapidly changed when he found out my mate was a tax inspector. 

hotpot

If there's a job I cant do myself they're the only people I deal with otherwise too expensive.

fnpt

lloyd said:

It's the way of the world, I'm happy to pay cash to people I know (of) to do jobs I can't, car stuff is different especially if it's a car that's worth a few quid.

I've certainly got no moral issues with 

I am not preaching or anything, but do you have moral issues with the Panama papers and the rich avoiding tax through complicated hidden schemes?

english_bob

Haych said:

Thanks @Neil, I thought as much. How has he never been done then, he's been doing this for over 20 odd years?!

Presumably a plausible amount of money goes through the books, but the cash transactions aren't documented-  you have no receipt or invoice to prove that the work was done, no electronic transfer of funds, and the money goes straight in his back pocket. There's nothing to prove money ever changed hands.

So unless you see this guy loitering when you give him the money:



...Mr Taxman is going to have a very hard time proving that anybody did anything wrong. 

strumjoughlamps

english_bob said:

but the cash transactions aren't documented-  you have no receipt or invoice to prove that the work was done, no electronic transfer of funds, and the money goes straight in his back pocket. There's nothing to prove money ever changed hands.

that was my first thought.. job gets bodged what proof do you have you had the work done..

stickyfiddle

This is illegal, but has been completely normal since taxes began. 

Italy's worse...! I was even given the option on our hotel stay back in April.

menamestom

Whilst the government are letting large corporations get away with tax evasion on a massive scale, whilst MP's are are receiving large dividends from portfolios they shouldn't have, whilst billions is being evaded in inheritance tax by the super rich I wouldn't worry too much about the back street garage.  Personally I think it would be better to save the 20% and give it direct to the poor and homeless the government completely neglect if morality is a consideration.  Whilst folks like Sir Philip Green and the Duke of Wesminster cream off billions with little goverment intervention I wouldn't worry too much about getting a cheap spray job.  The people who should lead by example are the worst in society. 

lloyd

fnpt said:

lloyd said:

It's the way of the world, I'm happy to pay cash to people I know (of) to do jobs I can't, car stuff is different especially if it's a car that's worth a few quid.

I've certainly got no moral issues with 

I am not preaching or anything, but do you have moral issues with the Panama papers and the rich avoiding tax through complicated hidden schemes?

I have differing moral standards and judgements to when the super rich hide millions in offshore accounts to when a jobbing builder or someone like myself saves a few quid which will help keep the van running this month, take the kids on holiday this year etc.

That's just me though, the super rich (and not so super) have many opportunities to play the system to legally avoid tax (ways which are not open to the man on the street) so they don't really need to take advantage of the illegal methods. 

Haych

menamestom said:

I wouldn't worry too much about getting a cheap spray job.  

That's something else that worries me too.  If he believes I'm paying cash and knows it won't go through the books then is he going to be as inclined not to cut corners and make sure his work is as professional as if everything was legit? 

I think I've made up my mind to pay by credit card, insist on an invoice and be a fussy bugger if I think he's done a 'make do' job.

Jalapeno

Illegal. Get an Invoice/Receipt Son of a friend of mine is a taxi driver - did the same (cash fares / off the meter). Problem when he broke his leg - he could only claim off insurance for his declared income - this went on for months.

menamestom

From the angle of the quality of their work, I'd perhaps have a look at some cars they have recently finished.  Supposed it also depends on the car, if it's a 15 year old Fiesta I'd be less inclined to pay as much as a 3 year old Audi.  The VAT side of things should not have much of a bearing on the quality of their work.  I've been to a back street garage that tidies up cars and their job is just OK.  I also know of a guy who sprays bikes from his garage and his work is factory quality.

Snap

There is no crime in paying cash, for anything really. Its upto the supplier to declare the income, and nothing to do with the payer. The matter of receipt guarantee is totally separate. You can of course pay cash and get all the paperwork.

fnpt

lloyd said:

fnpt said:

lloyd said:

It's the way of the world, I'm happy to pay cash to people I know (of) to do jobs I can't, car stuff is different especially if it's a car that's worth a few quid.

I've certainly got no moral issues with 

I am not preaching or anything, but do you have moral issues with the Panama papers and the rich avoiding tax through complicated hidden schemes?

I have differing moral standards and judgements to when the super rich hide millions in offshore accounts to when a jobbing builder or someone like myself saves a few quid which will help keep the van running this month, take the kids on holiday this year etc.

That's just me though, the super rich (and not so super) have many opportunities to play the system to legally avoid tax (ways which are not open to the man on the street) so they don't really need to take advantage of the illegal methods. 

Fair point. However, you do realize that if everybody paid the full amount of tax they are due, then everybody would pay less. Utopic, I know.

As it is, only the people who own their own business can afford to evade tax whilst employed people will always be fully taxed.

 

Jez6345789

As stated totally illeagal 

that said as a regular customer and referring customer he might just be trying to help you out abit.

if he has had any form of inspection they have a pretty good system of industry benchmark to compare stuff like materials paint number of employees v labour on jobs etc etc etc so if he falls out of that range they dig deeper.

i
The nature of the current tax system encourages the avoidance mentality when a company like Starbucks pays less tax than my little company.

Sucessive governments turn a blind eye and listen to all the bollocks about how many people our 600 power brand branches employee and if Starbucks et al pulled out of the U.K. Think of the effect on the unemployment numbers. This iconversation is usually accompanied by the blue print of our massive expansion program to double our branches in the next 3 years, so civil servant goes away with a warm fuzzy feeling that he is helping to save jobs and grow new ones in the future. 

Ultimately all all the loopholes and special concessions could be done away with at a single stroke of the pen.

with the simple line no allowances no concession for anyone .

would Starbucks and others walk away from a whole countries worth of sales would the sad people who can't start the day without their Starbucks ( such is the crazy brand loyalty) riot in the street because the Goverment said no concessions for anyone. I very much doubt it and far fewer people would offer cash deals.

i for one do not believe in Vat its a tax and administration burden placed on the shoulders of business as it is political suicide to set income tax at a starting rate of 40/50% 

i believe  in a clear transparent tax no concessions and no Vat. I also belive Ni contributions should be clearly identified as health care and pension, benefits and not shuffled around Whitehall department and bid or argued for.

dont get me started lol

lloyd

fnpt said:

lloyd said:

fnpt said:

lloyd said:

It's the way of the world, I'm happy to pay cash to people I know (of) to do jobs I can't, car stuff is different especially if it's a car that's worth a few quid.

I've certainly got no moral issues with 

I am not preaching or anything, but do you have moral issues with the Panama papers and the rich avoiding tax through complicated hidden schemes?

I have differing moral standards and judgements to when the super rich hide millions in offshore accounts to when a jobbing builder or someone like myself saves a few quid which will help keep the van running this month, take the kids on holiday this year etc.

That's just me though, the super rich (and not so super) have many opportunities to play the system to legally avoid tax (ways which are not open to the man on the street) so they don't really need to take advantage of the illegal methods. 

Fair point. However, you do realize that if everybody paid the full amount of tax they are due, then everybody would pay less. Utopic, I know.

As it is, only the people who own their own business can afford to evade tax whilst employed people will always be fully taxed.

 

Yeah, well I'll start paying all my tax when those at the top pay theirs-I'm salaried btw so don't get much opportunity to stick it to the man.

Abiding by the rules should always come from the top down, and until it does, I'll try and save myself (and help others) a few quid here and there.

Jalapeno

Jez6345789 said:

would Starbucks and others walk away from a whole countries worth of sales would the sad people who can't start the day without their Starbucks ( such is the crazy brand loyalty) riot in the street because the Goverment said no concessions for anyone. I very much doubt it and far fewer people would offer cash deals.

I am exercising a one-man consumer boycott of Starbucks - Costa pay many millions of tax as they are a UK based business (part of Whitbread), and Starbucks pay next to nothing ....... (And I prefer Costa's coffee)