Mixed morals on deals for East Lancashire cash-in-hand tradesmen (From Lancashire Telegraph)

Mixed morals on deals for East Lancashire cash-in-hand tradesmen

1:18pm Wednesday 25th July 2012 in News By Bill Jacobs, Local government reporter

EAST Lancashire politicians and businessmen have given treasury minister David Gauke a mixed reception over his claim that it is ‘morally wrong’ to pay tradesmen in cash.

He argued the practice, often used to avoid tax, came at ‘a big cost’ to the Treasury and meant other people had to pay more.

Blackburn MP Jack Straw and his Pendle colleague Andrew Stephenson both said that while the assertion was right in principle it was unworkable in practice.

Both admitted paying window cleaners and others in cash.

Chief executive of East Lancashire Chamber of Commerce Mike Damms, agreed that paying in cash to avoid VAT was strictly out of order but said he had paid workmen a few quid to do an extra job at his home without asking about their tax position.

Michael Lee, leader of the Conservative opposition on Blackburn with Darwen Council, strongly backed Mr Gauke and said: “I have never paid cash in hand.”

Mr Straw said: “In principle he is right, people should not pay cash in hand to avoid tax.

“But I have paid cleaners in cash. Many of them earn under the tax threshold anyway. I also pay my window cleaner a tenner in cash but he is self-employed and his tax is a matter for him. I have never, for instance, paid a mechanic in cash to get a discount on the bill or avoid VAT.”

Mr Stephenson was similarly correct when it came to car maintenance bills but said: “David is a Treasury Minister so I would not expect him to hold any other view.

“I would not use those terms but people should not pay cash in hand to avoid tax. I have paid cleaners and window cleaners in cash because that is what they want.” Mr Damms said: “It is wrong to pay traders in cash to avoid tax. It is unfair competition that disadvantages those businesses that pay tax properly.

“It also reduces the customer’s consumer protection rights. But I have paid tradesmen a few pounds to do an extra job while they were in the house for something else, and not thought about the tax, as a sort of tip. The question, I suppose, is when does ‘tipping’ become tax avoidance?”

The government is estimated to lose about £2billion a year to the black economy as tradesmen fail to pay VAT or income tax by not declaring payments.