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Revenue targets cash-in-hand builders

Paying a builder or cleaner in cash, allowing them to evade VAT or income tax, will result in even deeper Government cuts to public services. That is the message from the most senior tax collector at Her Majesty’s Revenue and Customs (HMRC).

In an interview with “The Daily Telegraph” Dave Hartnett, Permanent Secretary for Tax, said people who contribute to the cash economy cannot then complain about austerity measures.

“Tax provides the funding to run the country – hospitals, schools and everything else”, he said. “Every time someone pays cash in order not to pay VAT, the nation gets diddled”. Harnett added that householders have a duty to ensure that other people do not evade paying their share of tax.

The BMF believes the Government has a golden opportunity with the forthcoming Green Deal to tackle the problem – and create jobs and growth. The BMF wants the Chancellor of the Exchequer to use his Budget Statement on March 21 to announce two measures:

  • Simplifying and clarifying existing VAT rules and rates because they are complex, confusing, and do not favour green improvements.
  • Extending 5% VAT to Repair, Maintenance & Improvement Work

    The BMF points out that installing insulation attracts a 5% reduced rate, but putting in double-glazing or low-emissivity glass means VAT is payable at the 20% full rate. Meanwhile, installing central heating & hot water system controls comes under the 5% VAT banner, but installing an energy-efficient boiler has to be charged at 20%. It believes it is perverse to apply a 5% rate on energy consumption but the 20% standard rate for energy conservation.

    The BMF believes that the easiest way to encourage Green Deal uptake would be to reduce VAT where specific actions to improve the energy performance of homes and workplaces are completed.

  • About Fiona Russell-Horne

    Group Managing Editor across the BMJ portfolio.

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