Difference between revisions of "Cash-in-hand (United Kingdom)"

In the UK in particular and in developed economies more generally, a recurrent question that customers ask of tradespeople, such as those doing home maintenance and repair work, is ‘How much for cash?’ Similarly, it is commonly the case that such tradespeople will give customers an official quote for doing a job with Value Added Tax (VAT) included, and then say, for example, ‘or 20 percent less for cash-in-hand.’  

In the UK in particular and in developed economies more generally, a recurrent question that customers ask of tradespeople, such as those doing home maintenance and repair work, is ‘How much for cash?’ Similarly, it is commonly the case that such tradespeople will give customers an official quote for doing a job with Value Added Tax (VAT) included, and then say, for example, ‘or 20 percent less for cash-in-hand.’  

The one thing absent from ‘cash-in-hand’ work, and its only illegitimate feature, is that it is not declared to the authorities when it should be. It is not declared for three reasons: to evade paying direct or indirect taxes (income tax in the former case; VAT or excise duties in the latter); to make a fraudulent benefit claim (where someone who is officially unemployed claims state benefits while working); and to avoid labour legislation (such as employers’ insurance contributions, minimum-wage agreements or safety standards in the workplace). Cash-in-hand work covers only activities where the means do not comply with regulations but the ends (goods and services) are legitimate (Staudt 1998)<ref>Staudt, K. 1998. Free Trade? informal Economies at the US-Mexico Border. Philadelphia: Temple University Press </ref>. It does not include criminal activity where the goods and services are themselves illegal, such as drugs-trafficking. The only illegitimate feature of cash-in-hand work, to sum up, is that the monetary transactions are not declared for tax, social security or labour law purposes (Portes 1994; Thomas 1992)<ref>Portes, A. 1994. ‘The Informal Economy and its Paradoxes,’ in N. Smelser and R. Swedberg (eds), The Handbook of Economic Sociology. Princeton: Princeton University Press: 89-101 </ref><ref>Thomas, J. 1992. Informal Economic Activity, Hemel Hempstead: Harvester Wheatsheaf </ref>.  

The one thing absent from ‘cash-in-hand’ work, and its only illegitimate feature, is that it is not declared to the authorities when it should be. It is not declared for three reasons: to evade paying direct or indirect taxes (income tax in the former case; VAT or excise duties in the latter); to make a fraudulent benefit claim (where someone who is officially unemployed claims state benefits while working); and to avoid labour legislation (such as employers’ insurance contributions, minimum-wage agreements or safety standards in the workplace). Cash-in-hand work covers only activities where the means do not comply with regulations but the ends (goods and services) are legitimate (Staudt 1998)<ref>Staudt, K. 1998. Free Trade? informal Economies at the US-Mexico Border. Philadelphia: Temple University Press </ref>. It does not include criminal activity where the goods and services are themselves illegal, such as drugs-trafficking. The only illegitimate feature of cash-in-hand work, to sum up, is that the monetary transactions are not declared for tax, social security or labour law purposes (Portes 1994; Thomas 1992)<ref>Portes, A. 1994. ‘The Informal Economy and its Paradoxes,’ in N. Smelser and R. Swedberg (eds), The Handbook of Economic Sociology. Princeton: Princeton University Press: 89-101 </ref><ref>Thomas, J. 1992. Informal Economic Activity, Hemel Hempstead: Harvester Wheatsheaf </ref>.  

This opens up a new avenue for tackling cash-in-hand work, suggesting that there is a need to move beyond stricter penalties and higher risk of detection. Rather, it is necessary to tackle the causes both by improving formal institutions and by raising citizens’ norms, values and beliefs through campaigns to increase awareness of the benefits of taxation and the public goods and services that are provided by tax revenue (Williams 2014a)<ref>Williams, C. 2014a. ‘Public Policy Approaches Towards the Undeclared Economy in European Countries: A Critical Overview,’ European Labour Law Journal 5(2): 132-55 </ref>.

This opens up a new avenue for tackling cash-in-hand work, suggesting that there is a need to move beyond stricter penalties and higher risk of detection. Rather, it is necessary to tackle the causes both by improving formal institutions and by raising citizens’ norms, values and beliefs through campaigns to increase awareness of the benefits of taxation and the public goods and services that are provided by tax revenue (Williams 2014a)<ref>Williams, C. 2014a. ‘Public Policy Approaches Towards the Undeclared Economy in European Countries: A Critical Overview,’ European Labour Law Journal 5(2): 132-55 </ref>.