Paying domestic staff in cash?

If you are paying your domestic staff in cash, beware, a new HM Customs and Revenue (HMRC) drive is looking for YOU.

Make no mistake, the authorities are embarking on a determined drive to catch those who often pay cash to staff at a level that entitles that person to state benefits, thereby raising their overall income, but avoiding the necessity of complying with tax regulations, paying PAYE and National Insurance.

Other methods of avoiding payments include:  providing free accommodation, or staff sharing with another family.

It’s simply too expensive for the government to ignore.  It is estimated that last year HMRC lost an estimated £57 million through tax evasion as a result of cash payments to just one category of domestic staff:  nannies.

Of the 30,000 nannies working in the UK, a survey recently indicated that a fifth worked on a cash basis.

New fines will be large:  all the back tax, plus a 100% fine and, say HMRC, the culprits are not difficult to find.  When an employee leaves and starts a new job, the previous payment and avoidance becomes immediately apparent.

New rules coming into force in 2013 will impose an obligation on employers to inform HMRC EVERY time they pay staff, not just once a quarter.

The reason for avoidance at such levels is that staff have to be paid out of already taxed income, thereby creating a situation where tax is effectively paid twice.

So the writing is on the wall.  We’re sure that none of our clients would use such tactics, but perhaps you know someone who does?  The Graham Agency can make the situation easier by arranging contact with a specialist firm who provide a full payroll service.  Ultimately, it could be a whole lot cheaper than the alternative!