Invoice Implications

[Read and Buried]

Lets hypothetically say there is 1 client that normally pays a business with cash in envelope. Around £2.5k to £3.5k per month. Now this client is thinking of actually getting 'properly' billed/invoices and pay directly into the business bank account. What would be the tax implications. How much % uplift would be fair to compensate for the tax burden? The business does about 30-35k revenue per annum with out this client in the mix.

 

[MyAccountantOnline]

Lets hypothetically say there is 1 client that normally pays a business with cash in envelope. Around £2.5k to £3.5k per month. Now this client is thinking of actually getting 'properly' billed/invoices and pay directly into the business bank account. What would be the tax implications. How much % uplift would be fair to compensate for the tax burden? The business does about 30-35k revenue per annum with out this client in the mix.

Is the business a limited company or a sole trader and is the business VAT registered?

 

[Bobbo]

What tax burden needs compensating for?

Are you suggesting the amounts are not already being declared for all relevant taxes?

 

[Mark T Jones]

It would partly depend on whether the tax evader was over the VAT threshold and were b2b or b2c

 

[bovine]

You know when you read something and cant quite be sure you've read it correctly?

0% is the answer, because there is no additional tax burden because you've be doing it correctly from day 1. Might even be cheaper now you dont have the cash handling fees business banks often charge.

 

[Read and Buried]

Is the business a limited company or a sole trader and is the business VAT registered?

Ltd Co. and not VAT registered as under the 85k threshold. I'm guessing its just the 19% corp tax its going to attract, but not sure if anything else I should account for. (Obviously the accountant is going to ask for bit of a hike in their monthly fees as the revenue will almost double up.)

 

[DontAsk]

Ltd Co. and not VAT registered as under the 85k threshold. I'm guessing its just the 19% corp tax its going to attract,

I would stop admitting you have been committing tax fraud.

What did you previously do with the under the table cash?

 

[Daybooks]

All things being equal the tax implications are unchanged as the method of payment is irrelevant. To make sense of the question then I infer that there is an inequality in as much as the “cash in envelope” has been used to evade taxes. This would be a criminal offence. The client may well be guilty of complicity.


Furthermore any professionally regulated accountant aware, or merely suspicious of such an arrangement also commits a criminal offence under anti-money laundering regulations if they do not report it through their prescribed channels.

 

[WaveJumper]

I too had to re-read this, not something to be asking on an open forum

 

[neilsolaris]

Fortunately it's hypothetical, so will only result in hypothetical jail time!

 

[JEREMY HAWKE]

How can you hypothetically go on like this without being hypothetically caught

 

[Craiglincs]

. The client may well be guilty of complicity.

Wait. You can get in trouble for paying your supplier in cash?

 

[neilsolaris]

Wait. You can get in trouble for paying your supplier in cash?

There is nothing wrong with paying in cash, as long as you declare it and pay the required taxes.

Phrases like "What percentage increase would be fair to compensate for the tax burden?", "I'm guessing it's just the 19% corporate tax it will attract," and "as the revenue will almost double" clearly indicate a hypothetical tax evasion scenario. If you interpreted it differently, I’d be interested to hear your perspective.

 

[Daybooks]

Wait. You can get in trouble for paying your supplier in cash?

The complicity isn’t the payment being made in cash but rather it being made in cash knowingly to facilitate an evasion of tax by the recipient.

 

[Newchodge]

Lets hypothetically say there is 1 client that normally pays a business with cash in envelope. Around £2.5k to £3.5k per month. Now this client is thinking of actually getting 'properly' billed/invoices and pay directly into the business bank account. What would be the tax implications. How much % uplift would be fair to compensate for the tax burden? The business does about 30-35k revenue per annum with out this client in the mix.

There is no tax implication unless the receiving business has been committing fraud. If they have been committing fraud they should not receive advice on this forum. Payment in cash should be treated in exactly the same way as payment directly into a bank account.

 

[Argentum Tax]

Wait. You can get in trouble for paying your supplier in cash?

You can get in plenty of big trouble if you conspire with another to evade tax by way of payment in cash.

The offence in question is 'Conspiracy to defraud', which is a Common Law offence which was expressly preserved by section 5(2) of the Criminal Law Act 1977 (CLA 1977).

The offence requires that two or more individuals dishonestly conspire to commit a fraud against a victim. The victim, in this case, being HM Revenue & Customs.