VAT fraud

[Baldhead]

You employ the services of a builder to carry out a few relatively small jobs, he wants paying in cash, you know he is VAT registered so it's highly likely the payment will not show on his accounts, who is actually breaking the law for tax evasion, is it only the builder, or are you also guilty because you don't get a VAT receipt?

Baldhead

 

[marcros]

The builder. but being paid in cash isnt an offence in itself- it just needs reporting like any other income.

It is good practice to give receipts for payments but i dont think that there is any legal requirement to do so unless asked to.

 

[Random Orbital Bob]

+1

As I understand it.........

my obligation as a VAT registered business is that I become a tax collector on behalf of customs and excise (a very powerful branch of Government by the way, with powers of search etc....way more so than HMRC). My responsibility is to calculate VAT at prevailing rate and apply that to my goods and services at sale price and then pass that on to the consumer. I then have to collect it, account for it and offset it against any VAT my business has been charged. The delta I am required to pay to Gov every quarter. If Gov owes me because I've bought more than I've sold then I either get a refund or credit for the next period of VAT reporting.

Nowhere in this charter does my customer have any responsibility. He/she just needs to make payment within the contracted credit period by legal tender. That may be cash, credit, cheque etc. All the legal duty to charge, collect and account for VAT is the businesses responsibility.

I am required to keep records of my business which can be inspected at any time by HMRC and/or Customs and those records must be kept at my registered business address.

So, keeping records of receipts is in my view an absolutely necessary part of an auditable bona fide business since that particular record indicates proof of the trade details with a particular customer and in many cases may also provide proof of delivery. Both of which are required to be entitled to legally recognise the revenue in any given accounting period.

But you as a customer? I think its just down to whether or not you deem it sensible that you have proof of purchase in order to exercise any post sale rights with respect to faulty goods and/or workmanship...in other words for your guarantee essentially. There is no business legislation requiring you to keep records of any transaction.

 

[Glynne]

Bob,
Customs and Excise no longer exist, nor does the Inland Revenue - they were both subsumed by HMRC 2005.
It took a couple of years for the legislation to catch up but the old HMC&E acts are no loner extant and the powers of search etc extend across all members of HMRC engaged in compliance activities.

As a VAT business you are legally obliged to provide your customer with a tax invoice if they themselves are VAT registered, as it is their evidence to reclaim input tax (VAT on their purchases). You can elect to provide a less detailed invoice for smaller amounts and till receipts often fall into this category.

From a VAT perspective, you are not obliged to provide a tax invoice to non-registered customers (i.e. members of the public) but I suspect there must be something in legal terms to provide a receipt if requested.

Unless you know rather than suspect the builder is looking to evade VAT i.e he tells you he is going to, you are not guilty of anything, but you can always report the transaction to HMRC if you are suspicious.

 

[bugbear]

You employ the services of a builder to carry out a few relatively small jobs, he wants paying in cash, you know he is VAT registered so it's highly likely the payment will not show on his accounts, who is actually breaking the law for tax evasion, is it only the builder, or are you also guilty because you don't get a VAT receipt?

Baldhead

Bear in mind that proof of payment (and/or schedule of work) can be very important in case of a dispute.

BugBear

 

[finneyb]

+1

I think its just down to whether or not you deem it sensible that you have proof of purchase in order to exercise any post sale rights with respect to faulty goods and/or workmanship...in other words for your guarantee essentially.

Bear in mind that proof of payment (and/or schedule of work) can be very important in case of a dispute.

BugBear

+1 to both, even to the extent of writing your own receipt and have him sign it as the cash is handed over, otherwise he could claim you had not paid and you would have real difficulties proving otherwise.

Brian

 

[Random Orbital Bob]

Bob,
Customs and Excise no longer exist, nor does the Inland Revenue - they were both subsumed by HMRC 2005.
It took a couple of years for the legislation to catch up but the old HMC&E acts are no loner extant and the powers of search etc extend across all members of HMRC engaged in compliance activities.

As a VAT business you are legally obliged to provide your customer with a tax invoice if they themselves are VAT registered, as it is their evidence to reclaim input tax (VAT on their purchases). You can elect to provide a less detailed invoice for smaller amounts and till receipts often fall into this category.

From a VAT perspective, you are not obliged to provide a tax invoice to non-registered customers (i.e. members of the public) but I suspect there must be something in legal terms to provide a receipt if requested.

Unless you know rather than suspect the builder is looking to evade VAT i.e he tells you he is going to, you are not guilty of anything, but you can always report the transaction to HMRC if you are suspicious.

Thanks for dragging me into the 21st century Glynne I'm guessing that's also why HMRC is the abbreviation for revenue AND customs

 

[Phil Pascoe]

If the customer were responsible in any way for any taxes incurred and avoided by the firm they've paid, they would be guilty every time they bought a coffee in Starbucks.

 

[Lons]

You employ the services of a builder to carry out a few relatively small jobs, he wants paying in cash, you know he is VAT registered so it's highly likely the payment will not show on his accounts, who is actually breaking the law for tax evasion, is it only the builder, or are you also guilty because you don't get a VAT receipt?

Baldhead

By asking the question the way you have, it suggests that the customer strongly suspected that the builder in asking for cash payment might be looking to avoid VAT. By condoning that, it could be argued that the customer "aided and abetted" VAT fraud. However in reality it would be very difficult to prove that and as said, the customer is in all normal circumstances, not culpable.

If there was a receipt provided then the builder has no defence if he did not add VAT or correctly register the sale of his goods and services through his accounts and HMRC would take a very dim view of that.
If no receipt at all was issued then it would have to be proved that the work was actually carried out and payment made or he could just deny everything or even claim he was doing you a favour in his spare time and at no cost to his company for free. HMRC would of course not believe that for a minute :wink:

Bob

 

[JandK]

If the customer were responsible in any way for any taxes incurred and avoided by the firm they've paid, they would be guilty every time they bought a coffee in Starbucks.

Well said!

 

[nanscombe]

And none of us begrudges paying out an extra 20% for (apparently) nothing, do we. :wink:


In reality any money not paid to one creditor usually ends up paying another bill anyway.

 

[Baldhead]

You employ the services of a builder to carry out a few relatively small jobs, he wants paying in cash, you know he is VAT registered so it's highly likely the payment will not show on his accounts, who is actually breaking the law for tax evasion, is it only the builder, or are you also guilty because you don't get a VAT receipt?

Baldhead

By asking the question the way you have, it suggests that the customer strongly suspected that the builder in asking for cash payment might be looking to avoid VAT. By condoning that, it could be argued that the customer "aided and abetted" VAT fraud. However in reality it would be very difficult to prove that and as said, the customer is in all normal circumstances, not culpable.

If there was a receipt provided then the builder has no defence if he did not add VAT or correctly register the sale of his goods and services through his accounts and HMRC would take a very dim view of that.
If no receipt at all was issued then it would have to be proved that the work was actually carried out and payment made or he could just deny everything or even claim he was doing you a favour in his spare time and at no cost to his company for free. HMRC would of course not believe that for a minute :wink:

Bob

Hi Bob

The customer wanted to pay by cheque, but the chap in question wanted cash, sometimes I think, 'there is a god'

Baldhead

 

[Random Orbital Bob]

That is very helpful, whilst circumstantial it does rather beg the question why would he want the currency in a non traceable form

 

[Chrispy]

On the other hand would you sell your car to a stranger for a piece of paper that may turn out to be rubber, or would you prefer actual spending money.

 

[Random Orbital Bob]

That's a pretty good point. Robust defence n all that.

 

[MickCheese]

A little off topic but as it has already been mentioned I will add.

Starbucks have not evaded any tax as far as I know and if the uk government doesn't like what they and other big businesses have done it is easy to make it an offence, they just choose not to.

I don't see how you can vilify a company for using the regulation to pay as little tax as possible, after all most of us would do it.

And before anyone says it I will mention, this has nothing to do with moral responsibility. That is a completely different thing.

Personally I want those loopholes to be plugged.

Mick

 

[Phil Pascoe]

Yes, it's no different from the scheme that G. Michael and co. put their money into - yes, it shouldn't exist but it does. If the system were fairer and simpler there wouldn't be the need for avoidance schemes.
By the bye, Joe Public who moans about the tax avoidance would simply pay more for his clothes/music/food etc. if the companies paid more tax. They would just increase costs to cover.
Incidentally, Mick, I just used Starbucks to make a point rather than accuse them of something criminal. As you say moral issues are slightly different.

 

[Ali]

Bit harsh to imply that anyone who receives cash for work is a tax dodger - as someone who works in a trade I would always prefer to be paid in cash.

Cash is king and the feeling of a dodgy cheque or a slippery customer who weasels their way out of paying isn't a nice experience.

 

[acewoodturner]

Quite a few years since I accepted a cheque from a customer, regardless of the amount. Doesn't make me a vat fraudster. I prefer a bacs payment straight into the bank.

 

[Phil Pascoe]

The word "knowingly" has caused a raft of problems - it is an offence to KNOWINGLY pass a cheque when there are insufficient funds to cover it. It would be far better if it were a straightforward offence as in some other countries - it wouldn't be half so dangerous to accept cheques.