Cash Jobs and Moral Repugnancy
Posted on July 25, 2012
Minister for the treasurer David Gauke has recently said that paying builders in cash for a discount is morally repugnant and that it is illegal tax avoidance? What I find surprising is that this has come out in the news as if it is some sort of dramatic recent discovery; I am no mathematical genius, but within a couple of years of leaving a pretty basic education, I kind of got the feeling that cash deals to avoid paying tax was more than likely, morally wrong but pretty much widespread. That was in the mid eighties.
Gauke: A question of morals
There are not many people in this country who have never benefited or thought they had benefited from cash discounts from builders, plumbers, window cleaners or gardeners and it is difficult for anyone to turn down the opportunity to save money, especially at time when it is particularly scarce unless you a re hedge fund manager or a calculator of derivatives. However, what really winds me up, is when tradesmen tell you they are doing you a huge favour, when then cash deals they are offering are heavily weighted towards themselves.
Most of my friends who work in relation to the construction industry will now what I am about to say, but for everyone else’s benefit I am going to give an example of how the builder is the one who gains everything in a cash in the hand deal. Let’s say, to keep it simple, that you have been quoted £10,000 for a fit out of kitchen and you pay roughly 30% Tax and NI on your own personal earnings as a PAYE employee.
- Cost of kitchen =£10k
- VAT at 20% = £2k
- Total cost = £12k
- Income you have had to earn to pay the job £15.6k
This is what normally happens in a builders cash deal.
- Cost of job £10k + 20% VAT = £12k
- Cash offer £11k- saving you £1k (“I’ll split the VAT saving with you mate”)
It is important to remember that any VAT you pay is passed directly to the revenue, so taking the example above, the builder is not only pocketing a grand for doing nothing, he is also avoiding income tax of £3k on the job. He is four grand and no paperwork better off and you are a grand better off. That doesn’t seem so good now does it? Especially when you realise a cash job is participation in illegal tax evasion and has no guarantee or receipt. If you are prepared to take a risk on a cash job, get your calculator out and assess how much the builder is making by avoiding tax, then you can start talking about a deal that will suit all parties, not just him. But remember…….No income tax no vat, no money back no guarantee!
Cash is King….But who is the real winner (Photo by David Cole © Press Portrait Service 01798-342716)
We all have what what we judge is an acceptable moral code, it is something we generally keep quiet through fear of condemnation but I would suggest that a man (David Gauke) who allegedly claimed inland revenue stamp duty of £8,550 on a second home through parliamentary expenses, is not the man to call us morally repugnant or tell us to pay a £10.00 window cleaning bill by BACS payment into a legitimate business account on receipt of a full invoice.
For my part, I would never pay a builder cash, not because I love the taxman, far from it, it’s just that I can’t stand the thought of saving a few quid to fill the pockets of someone doing a job where the risk is all on me.
Though I guess that has nothing to do with morality and more to do with not getting screwed over.