Small firms are right to ask for cash – honestly

Sunday 29 July 2012

Hard-working, tax-paying small firms are just as frustrated as Treasury Minister David Gauke that they pay more than they need to while others with far deeper pockets dodge their responsibilities.

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By Colin Borland

But when the tax affairs of some large corporations seem to be a matter of gentlemanly negotiation between their lawyers and the Revenue, it's little wonder his comments about the morality or otherwise of small businesses taking cash payments have sparked furious debate.

But what are we really arguing about? There is nothing wrong with accepting payment in cash. Cash is a convenient, safe and immediate way to take payment. Cheques take time to clear and can bounce. Card payments incur costs. If I need to buy materials for a job, and trade credit is tight, having the cash to do so is essential.There should be no inference that, by preferring cash payment, a business is somehow dishonest. The death of cash has been wishfully predicted by those who dislike it for as long as I can remember. But until someone comes up with a viable alternative, it will be a central tool for many small businesses.What we're really talking about here is under-declaring income – whether for income tax or VAT returns. And, here, the matter is cut and dried. It is illegal, and HMRC is cracking down on it. Hard. So the actual question is whether it is morally wrong to break the law, or induce someone to break the law, with the object of saving money.The existence of such a moral obligation to obey the law is a problem with which scholars have wrestled down the ages and, frankly, I think we should leave them to it. What I would argue is if not morally dubious, certainly unfair, is for potential customers to make it clear to an independent trader that they will only get a piece of business if they accept a price which implies a need to break the law. When business is slow and, whatever the inflation figures say, overheads are rising, this places self-employed individuals trying to make a living in an invidious position. From a practical point of view, in a modern state which is founded on the rule of law, it is probably in our interests to obey that law – whether we agree with it or not. A quick look at where a culture of tax evasion ultimately led Greece should be proof enough of that. Colin Borland is head of external affairs for the Federation of Small Businesses in Scotland

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Small firms are right to ask for cash – honestly

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