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HMRC Call for Evidence on Cash and Hidden Economy: An Utterly Predictable Outcome.
10/07/2016, by Lee Sharpe, Tax News - General
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Regular readers may recall that I got a little aerated over HMRC’s “Call for evidence on Cash, Tax Evasion and the Hidden Economy” in the 2015 Autumn Statement. HMRC does not like cash. Some may also recall the uproar around 4 years ago, when a Treasury minister was widely reported to have asserted that it was “morally wrong” to pay tradesmen in cash.

HMRC has now published its Summary of Reponses received. Astonishingly – and despite HMRC’s emphasising that cash is on the wane, more than a few respondents said that

  • Cash has a significant role to play in the functioning UK economy
  • It facilitates millions of legitimate transactions
  • Consumers and businesses prefer cash because it is cheap, quick, familiar, anonymous and good for budgeting
  • It is the preferred medium for numerous vulnerable groups
  • There are nearly 2 million “unbanked” individuals, who never interact with the banking system.

If fact, most respondents agreed that for the foreseeable future, cash is likely to remain a vital payment method for millions of people.

The response is not really astonishing. What’s astonishing is that HMRC needed to be told. What is also astonishing is that, if cash is indeed on the wane as HMRC reports, then why should HMRC get so fixated about it now? There is a risk of being so focused on eradicating cash, as to miss that the new digital alternatives are in no way immune - in fact, in the OECD’s own words, ““electronic sales suppression” techniques facilitate tax evasion and result in massive tax loss globally”. The UK should be aware of this, given that it took part in the preparation of the OECD report.

But there is another, quite everyday reason to stick with cash: paying tips in cash should mean that the employee gets to keep more of the money that you intended for him or her.

About The Author

Lee is TaxationWeb's Articles & News Editor and writes for TaxationWeb. He is a Chartered Tax Adviser with experience of advising individuals and owner-managed businesses over a broad spectrum of tax matters.
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