Paying cash in hand

[Naive citizen]

I'm sure this question has already been asked about a billion times. But here we go.

I have a worker who's not employed by my company who does a lot of work for us. It's not entirely regular, sometimes a whole week, sometimes nothing at all, sometimes one or two days a week.

The work is being done, I have to have the work done and I want more done. So I have to pay for that work. The problem I have is that this worker won't invoice me. I've asked about 5 times for invoices and the conversation fizzels out and nothing happens.

From an accounting and tax point of view I suspect this isn't best practice. So if I can't get the invoices for the work then what must I do to make things right for the man.

 

[ethical PR]

Put him on PAYE ?

 

[BustersDogs]

No invoice, no money? Occasionally I use other dog walkers to help out, and I pay on receipt of invoice. I still owe someone £18 from about a month ago, but she won't invoice me so I can't pay her.

 

[Mayor]

Write the invoice yourself, and ask them to sign it when you hand over the money. No signature, no dough.

 

[businessfunding]

I agree Mayor, but the OP might still be held responsible if the contractor is not registered self employed.

 

[Paul Norman]

In business, it is important to put things on a regular footing.

This guy has two options.

1. He goes on your payroll. Give him a contract of employment, and process everything correctly.
2. He operates as a sub-contractor, and supplies you with invoices. On receipt of the invoices, you pay him.

At the moment, you are the one responsible for tax on the monies you are paying this guy, because no formal, structured, written arrangements are in place between you. It is so tempting to get drawn into these informal ways of doing things, because the guy is an excellent worker, etc. Don't.

 

[fairdealworld]

No idea what work this man does for you but I'd think like Mayor. Some people have a mental block when asked to produce things like invoices, some people though perfectly good at other tasks actually have serious problems with reading and writing. Simplest way to get an invoice is to create an example of a suitable invoice yourself.

 

[simon field]

Yes, just get a duplicate book, write it out and get him to sign it.

Then yo ass is covered innit.

 

[faradaykeynes]

put him on self billing invoicing system

 

[Naive citizen]

Yes, just get a duplicate book, write it out and get him to sign it.

Then yo ass is covered innit.

Believe it or not, that's exactly what I've done. Won't bl00dy fill it in!!

So basically the most important thing is to have the documentation in order to show what payments have been made.

Pretty much as I thought and means I've got to get it sorted!

 

[ethical PR]

As others have indicated your solution is simple. Fill in the document for him and confirm that payment will be only be forthcoming once you have his signature.

On a side note are you confident that he is registered as self employed// partnership/limited company?

If not, perhaps that might explain his reluctance?

 

[Chris Ashdown]

Perhaps not that simple

I believe the company should have a understanding of the HMRC self employment guidelines and be able to check if the persons duties would fulfill the guidelines to be considered self employed,

After all if you are dictating the time he works, the work he does and if he is liable for any financial risk etc then you should know he is not self employed whilst working for you.

With a HMRC inspection you could find yourself liable for any tax owed to HMRC

 

[Grumpybloke]

In business, it is important to put things on a regular footing.
At the moment, you are the one responsible for tax on the monies you are paying this guy, because no formal, structured, written arrangements are in place between you. It is so tempting to get drawn into these informal ways of doing things, because the guy is an excellent worker, etc. Don't.

My wife "employs" a woman to clean for her father. This is very informal, just x hours at £y per week, cash in hand. I assume she isn't registered as self employed. Do you think we may be causing problems for ourselves re. tax?

 

[AshcoAccountants]

Firstly you need to establish if he is an employee in the eyes of HMRC (HMRC do have a questionnaire on their website for you to do that -good idea to keep a copy).

Once that is established and assuming he is an employee you don't necessarily need to run a payroll for him if he meets certain criteria (includes the amount he earns, if he has other employment, etc).

If he is not an employee then there is nothing wrong with paying someone cash as long as you correctly account for it. It would also be a good idea to keep a record of their name, address, date payment was made and what it was for (ie a self billing invoice). The person doesn't need to sign the invoice.

Although paying in cash can be more difficult to account for, there is nothing wrong with it and you are not breaking any laws. HMRC would prefer you pay by cheque as there is independent verification a payment was made. However, there is nothing wrong with paying cash.

If you prefer, you can always withdraw the exact cash amount from the bank and show that it was specifically used to pay a particular person.

I suspect that HMRC wouldn't have a problem with you but may have a problem with the person you are paying if that person has not declared the cash received.

Hope that helps? - am happy to discuss this with you in private if you prefer.

Count

 

[Talay]

My wife "employs" a woman to clean for her father. This is very informal, just x hours at £y per week, cash in hand. I assume she isn't registered as self employed. Do you think we may be causing problems for ourselves re. tax?

I get scared crossing the road and worry myself sick about it - er....no I don't.

Technically, there is always the potential problem but in reality, you pay the window cleaner and don't care what his tax arrangements are. Same with the cleaner, odd job man, taxi driver, anyone you pay cash to.

 

[Paul Norman]

I get scared crossing the road and worry myself sick about it - er....no I don't.

Technically, there is always the potential problem but in reality, you pay the window cleaner and don't care what his tax arrangements are. Same with the cleaner, odd job man, taxi driver, anyone you pay cash to.

This kind of minor arrangement is probably below the radar! And it is fundamentally different from the opening post, where a business is failing to properly document what is happening, and failing to be clear on the status of the worker in question.

 

[Talay]

True but sometimes you've got to work with what you've got and if the person you need to do the job will only work in a cash / no invoice manner then you have to decide whether to accommodate or not.

The correct answer is not always to go by the letter of the law !

Sometimes you just need to get on and get the job done.

 

[Chris Ashdown]

True but sometimes you've got to work with what you've got and if the person you need to do the job will only work in a cash / no invoice manner then you have to decide whether to accommodate or not.

The correct answer is not always to go by the letter of the law !

Sometimes you just need to get on and get the job done.

Hi Talay

What laws do you suggest we ignore then, do you have a pre defined set or just make them up as you hit problems

If we all chose to ignore laws we don't like, who would want to live in the UK

 

[Paul Norman]

True but sometimes you've got to work with what you've got and if the person you need to do the job will only work in a cash / no invoice manner then you have to decide whether to accommodate or not.

The correct answer is not always to go by the letter of the law !

Sometimes you just need to get on and get the job done.

This is one of the reasons why you should be careful about taking unqualified advice from people on forums like this.

1. Payroll, and tax law, carries very serious consequences if you break them. The opening poster, and their worker, are breaking the law. It is at best unwise to continue to do so.

2. I remember threads on this very forum when the masses arose in their condemnation of wealthy people legally minimising their tax bill. Yet, curiously, we have here an advocate of deliberate and illegal tax reductions.

3. Thankfully, I hope, and expect, that this post is not representative of the views of the business persons on this forum. Or in the nation at large. At least I sincerely hope not. Like most businesses, Soleheaven go to some pains to be squeaky clean on this matter for two simple reasons - first, it is in accordance with our ethical approach to business, and second, messing about with tax is very risky.

 

[Fencer]

Hi - I expect you already know that every self-employed person has a unique tax reference number. First step if you're making regular payments to a self-employed contractor is to ask for their UTR and National Insurance number and keep a note of it on file. If things go wrong that will help you to prove that you did everything you could to ensure that you were obeying HMRC rules. No UTR and you have a problem. I run a co-operative of self-employed contractors, every so often we get Business Gateway to run a targeted half day workshop for new entrants on how to deal with taxation for the self-employed. Up until that point I was often told by a contractor that he was self-emplyed even though he wasn't registered with HMRC, they weren't doing it from badness, they just didn't understand the system, it's not taught in schools, or at least not here. Good luck anyway.

 

[Bob]

Perhaps not that simple

I believe the company should have a understanding of the HMRC self employment guidelines and be able to check if the persons duties would fulfill the guidelines to be considered self employed,

After all if you are dictating the time he works, the work he does and if he is liable for any financial risk etc then you should know he is not self employed whilst working for you.

With a HMRC inspection you could find yourself liable for any tax owed to HMRC

This is the most helpful answer. You haven't explained yet why you think he is self-employed and not an employee on a "zero hours contract". It's not a question of choice, it is a question of fact. From what you have posted so far, he sounds more like an employee as self employed people don't normally get paid unless they raise some kind of invoice/demand. If he is an employee and you are on the receiving end of an HMRC enquiry, you may well end up paying his tax for him

 

[Bob]

Hi - I expect you already know that every self-employed person has a unique tax reference number. First step if you're making regular payments to a self-employed contractor is to ask for their UTR and National Insurance number and keep a note of it on file.

Whilst this may be helpful, it does not prove that the engagement is one of "self-employment" i.e a contract for services rather than a contract of service. Many employed persons also have a UTR. In fact all a UTR indicates is that at some time you have been required to complete a tax return

 

[Bob]

My wife "employs" a woman to clean for her father. This is very informal, just x hours at £y per week, cash in hand. I assume she isn't registered as self employed. Do you think we may be causing problems for ourselves re. tax?

Sadly, there is a potential issue here although frankly you would have to be unlucky for HMRC to actually do anything about it. HMRC guidance is here and the problem can arise where a cleaner has many of these small contracts and doesn't declare the income for either tax or benefits purposes

 

[Fencer]

Hi Bob - yes, sorry, realised I should have made it clearer that UTR is part of the process not proof on i's own.