Cash-in-hand payments to remain ‘legitimate’

Number 10 has no plans for a cashless economy despite fears over tax avoidance

Cash-in-hand payments will remain a “legitimate” way of settling bills, despite calls for a move to electronic transactions to reduce opportunities to avoid tax, Downing Street has said.

The Taylor Report called on Chancellor Philip Hammond to use this autumn’s Budget to unveil measures to clamp down on the “hidden economy”, amid estimates that cash payments cost the Treasury £6.2 billion in uncollected tax each year.

The report’s author Matthew Taylor said the Government should accredit certain electronic payment platforms to encourage the move to a cashless economy.

He suggested that use of approved methods could be made a condition of migrant workers’ visas, to prevent them from taking cash payments for jobs.

Labour leader Jeremy Corbyn agreed it was “obviously” wrong for cash payments to be used as a means of avoiding tax, and said he would like to see the practice phased out.

But a Downing Street spokeswoman said she was not aware of any work within Government to make Britain a cashless economy.

She added: “We need to make sure that we are at the forefront of all the technology and innovation around making it easier to pay for things.

“But at the same time many prefer to pay cash-in-hand and that is a legitimate way of paying for goods and services.

“There needs to be a balance so that people who prefer to pay cash-in-hand can continue to do that legitimately, and for people who prefer not to do that we have the technology and innovation to help them to do it.”

The onus is on the person receiving a cash payment to ensure it is declared in the correct way, she said.

The Taylor Report cited HM Revenue and Customs figures suggesting that cash-in-hand payments to casual workers like gardeners, window cleaners or child-minders contribute to a hidden economy accounting for around 18% of the gap between amounts of tax due and the total paid.

While people hiring such workers may wish them to pay the appropriate tax, it is hard in practice for them to be sure that they do, said the report. As a result, “many people inadvertently participate in the informal economy.”