Just as the boss of HMRC was complaining that ‘cash in hand’ payments are robbing hospitals and schools of tax money, along comes a survey of accountants that claims that builders make the most mistakes on their tax returns as they deal in large amounts of cash.

But before giving them a hard time look at accountants, sixth on the list.

The head of HM Revenue & Customs, David Hartnett, was quoted in the Telegraph as saying that "Tax provides the funding to run the country: hospitals, schools and everything else. Every time someone pays cash in order not to pay VAT, the nation gets diddled." He went on to say that this practice is to be cracked down on after April 2012 and that householders had a duty to report such proposed dealings.

But maybe it’s all a big mistake. According to Bloomsbury Professional, publishers of professional information, builders followed by taxi drivers make the most mistakes on their tax returns.

Builders are seen as high risk in this regard as, according to Bloomsbury Professional, ‘….they are often paid in cash and the sums of money involved can be quite substantial’.

Because of this HMRC does like to keep their eye on builders and have been known to contact people who have recently had work done to ask them who did the job.

Martin Casimir of Bloomsbury Professional said “Perhaps more than any other trade, builders frequently deal with quite large sums of cash. This makes accurate recordkeeping challenging and creates numerous opportunities for tax evasion. Cash-in-hand with the promise of no VAT is still incredibly common. With VAT now at 20%, the incentive for cash payments is greater than ever. To be fair to builders, it’s just as often the customer who asks for a cash-in-hand discount. With competition fierce, the temptation to undercut a rival quote can be irresistible.”

He also added “The construction industry has been hard hit by the recession. Many builders who were previously working for large businesses have now set up on their own. For a builder in the 40p tax bracket, not paying income tax and National Insurance on a £1,000 job can save over £400.”

Taxpayers most likely to file incorrect returns

Occupation Per cent
Builders/carpenters/plasterers 32.6%
Taxi Drivers 10.9%
Personal service company contractors (e.g. IT consultants) 8.7%
Plumbers 6.5%
High Net Worth investors 6.5%
Accountants 4.3%
Buy-to-let investors 4.3%
Doctors/Dentists 4.3%
Expats 4.3%
Restaurateurs 4.3%
Solicitors 4.3%
Electricians 2.2%
Gardeners 2.2%
Other healthcare professionals (e.g. social workers) 2.2%
Shopkeepers 2.2%
Actuaries/financial analysts 0%
Architects/surveyors 0%
Librarians 0%
Non doms 0%
Pilots 0%
Veterinarians 0%
Other 0%

Looking at the professions doctors and dentists came out worst, this said Bloomsbury may be down to a recent tax amnesty, but one wonders if they are just using their prescription handwriting when filling in the returns.

But Martin Casimir said: “A sizeable number of medical practitioners are principally employed by the NHS but also have earnings from private consultancy work. HMRC has raised questions as to whether these private earnings always find their way onto tax returns.”

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