OT - why we need to keep cash

For a long time HMRC didn't make VAT vs Income tax connections, and it was pretty easy to suppress revenue, but about 7 or 8 years ago one of my clients had a joint review where they did match VAT to self assessment (we passed OK) and I remember thinking it was the right approach. Now with digital tax returns being required for VAT and soon self assessment that will be much easier to do. Of course what it will mean is that more "miscreants" will simply not register/deregister for VAT or report income for self assessment, and at the same time increase customer prices to cover the VAT they can no longer recover legitimately.

However, as our dear departed socialist worker representative would say, tax revenue lost in the grey market morass is nowhere near as much as that lost by multinationals transfer pricing profits to low tax environments. I'm not sure which is the greater source of hemmorrhage to HMRC but I suspect the grey market is the easier one to fix

Quite simply, they don't buy materials for "off the books" jobs through the company bank account. They either pay cash themselves or get the customer to pay for the materials. Nothing there for HMRC to match up.....

You suspect, I'm pretty certain the grey market is the easier one to fix. Plus it wouldn't close the pathway to directorships and other cushy numbers.

Yes your right, apparently its estimated that £9 billion is the value of the illegal drug trade - Truss missed a trick there, legalise and regulate that and the financial black hole would be considerably smaller, plus savings in reduction of crime, health treatment etc. There was a Dr in Warrington who undertook an experiment, prescribing heroin, within 6 months local dealers put out of business, crime rates down and deaths from overdose vastly reduced. The government wouldn't continue the trial though.

Saw someone online yesterday saying they'd racked up £600 in a month in bank charges from customers using their PIN card. That's £600 to the bank rather than the retailer. How much cash would you need to deposit to rack up that amount of charges? How much business would they have done to rack up £600 in charges?

The comparison might be enlightening.

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Originally Posted by MadAmster

Saw someone online yesterday saying they'd racked up £600 in a month in bank charges from customers using their PIN card. That's £600 to the bank rather than the retailer. How much cash would you need to deposit to rack up that amount of charges? How much business would they have done to rack up £600 in charges?

The comparison might be enlightening.

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Without knowing how much spend that £600 represents it is impossible to say. If it was £6,000 then costly, if it was £600,000 not so much. Banks charge a percentage per transaction plus other fees which vary between 1% and 3% of the total amount.

I did an analysis of the costs of handling cash, viz card payments for an organisation a decade back and even then the total costs of handling cash were in the region of 10 -20% higher than card payments. Debit cards were best as the percentage the bank takes is less, but given that without cash, you don't get staff pilfering, your insurance is cheaper, you don't need as much security, you don't get forged notes, you don't have to store cash on premises, you don't have to find a bank branch to deposit it (with the risk of having large amounts of cash on you in public).

There are other and cheaper ways of getting customers to pay that don't involve cash, bank transfers for instance.

I got the impression it was a small business and it was debit (aka bank/PIN card) card transactions rather than credit card ones.