News & views

Thursday, September 14, 2017

As research shows nearly half of Brits pay tradesmen cash in hand, we look at the implications of the Taylor Review’s plans to end cash payments.

Paying builders, plumbers, gardeners, window cleaners and other tradespeople in cash is costing the economy up to £6 billion a year in lost tax (SC1), according to the Government.

That’s why it wants to tackle those who don’t declare all their income, and put an end to the so-called hidden economy. In light of the increase in self-employed and ‘gig’ workers, it called for a review to look at modern working practices in the UK.

Led by Matthew Taylor, chief executive of the Royal Society of the Arts, the review recommends that jobs be paid through traceable payment platforms such as credit cards, contactless payments and PayPal to encourage millions more cashless payments for services. This would see a huge shake-up for the UK’s legions of sole traders and small businesses…

End of cheap deals

In a recent poll for online home improvement service marketplace Plentific, 46% of adults admitted to paying tradespeople cash in hand to get a cheaper deal (SC2) in the past year.

Not surprisingly perhaps, it’s the older generation who are more likely to pay by cash. A total of 56% of over-55s say they have paid a tradesman using this method, whereas only 33% of 18 to 34-year-olds have. Younger people are less likely to use cash for any payment in today’s digital economy, not just for tradespeople.

When the figures are broken down by location, Liverpool was way ahead at the top of the table. Some 54% of people there have paid cash in hand in the past year. This was followed by London (25%), and Plymouth and Southampton, both on 22%.

Self-employed hit with higher tax bills

The crackdown on cash payments would see tax increases for many self-employed workers, which could force some out of business, as well as alienating tradespeople who do not have access to a computer.

The recommendations have been criticised by some trade unions. Steve McNamara, general secretary of the Licensed Taxi Drivers’ Association, says it’s the corporate giants that are “ripping off the country” by paying “little or no tax”, not tradespeople.

The Government had pledged not to ban cash-in-hand payments, but says it does want to redress the imbalance in tax contributions between the self-employed and employees who work for a company.  

The Taylor Review says rates of National Insurance for employed and self-employed people should be brought closer in line. But the Government ruled out reintroducing Chancellor Philip Hammond’s efforts to raise NI contributions for self-employed people. After he initially announced it in the Budget, his proposal was scrapped after a public outcry.

Cashless payments welcomed

Many tradesmen say they would actually welcome a digital payment platform, and indeed a lot already deal in online payments or bank transfers as these provide more security and protection if things go wrong. Having a digital paper trail means that any dispute over payments can be backed up with hard evidence. Digital systems can also be linked to pensions and other benefits.

Not only that, they would ensure a level playing field in terms of job competition. Contrary to popular belief, it’s often customers driving the hidden economy, not tradesmen, who feel pressured to lower their prices to compete with others accepting cash payments.

Stephen Jury, of Plentific, says: “Tradesmen are often painted in a bad light by the media when it comes to things like cash in hand payments. Our statistics show that, actually, it can be the customers who are driving this option to save a few pounds.”

Insurance Requirements

Here at NIG we offer a range of products that can cater for a variety of small businesses, including tradespeople and enterprises run from home.

Our Tradesman eProduct is designed for traditional building and allied trade businesses whose turnover is up to £1,000,000 and covers up to 15 full time workers.

Our Tradesman eProduct has recently undergone several improvements. These improvements include the acceptance of an additional 45 trades, a number of which are only available via our online trading platform, TheHub.

We’ve also increased our height limit without the need to refer from 12 metres to 15 metres, making it even easier to bind business.

Click here to find out more about our Tradesman eProduct or visit TheHub to trade Tradesman today.

Our Business From Home policy caters for a range of trades and professions that operate from the policyholder’s home.

The product features Loss of Income cover up to £100,000 as standard, as well as the option to add accidental damage to Buildings and Business Contents.

Click here to find out more about our Business From Home policy or visit TheHub to trade Business From Home today.

Sources.

SC1 - http://economia.icaew.com/en/news/july-2017/end-cash-in-hand-payments-says-taylor-review

SC2 - http://buildingproducts.co.uk/nearly-half-uk-adults-pay-tradesmen-cash-hand-get-cheaper-deal/