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Matthew Taylor highlighted in his review of modern working practices that there is a growing ‘cash-in hand’ economy in the UK. He reported that these cash-in hand payments often go untaxed and this is costing the UK economy £6 billion a year.

What is the cash-in hand economy?

In 2016, there were approximately 5.4 million small to medium businesses in the UK. These businesses usually employ between 1-9 people.

Most of these small businesses accept payment in various ways such as cash, cheque and through online portals.

The vast majority of these businesses declare all their income. Sadly, a very small minority don’t.

Getting paid in cash is not illegal if you declare this as income and pay Income Tax and National Insurance on it. What is illegal is not declaring this cash payment as income and thus avoiding paying tax.

Cash-in hand working is often associated with small (usually one or two people) businesses who do casual work, such as gardeners, window cleaners or labourers.

How HMRC is tackling cash-in hand payments

Historically it has been very difficult for HMRC to tackle the problem of cash-in hand payments.

The only way for them to tackle this problem head-on is through monitoring the actions of millions of small businesses. This is totally unfeasible as HMRC doesn’t have the man-power or financial resources to do it.

Will technology come to the rescue of HMRC?

Matthew Taylor’s review proposes that the use of new online payment platforms should be widely encouraged to help reduce the amount of cash payments.

For small businesses who are interested in using these online payment platforms, there are different options available. Some of these are:

Paypal

Paypal is recognised world-wide as a secure way of making online payments. It offers different options for businesses. For example, by using the ‘Accept Paypal’ button on their website, businesses can accept through their own website. The ‘Paypal Here’ app allows businesses to accept Chip and PIN or contactless payments.

Worldpay

Worldpay is very similar to Paypal in that it offers businesses multiple options to accept electronic payments. These include portable card machines, mobile card machines, accepting payments over the telephone or through email.

Apple Pay

Effectively, any Apple device (Mac, iPhone, iPad, Apple Watch) can be used to make a payment. When the device is presented near a reader, payment will be deduced. In essence, it is replacing the need for a debit or credit card.

About The Author

Karl Bilby

We work very closely with our expert accountants to bring you the latest factually correct tax and accounting news. We also enjoy writing about small business news that we hope you find useful!

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