Paying tradespeople

Banking for a small business is a nightmare. The credit card companies charge me for the pleasure of having their service, then a % of how much the transaction is - different amounts for different types of cards. Then the bank charge for the payment into the account, as they do for cash/cheque/bank transfer and the bank also charge me for the pleasure of having an account with them even though the nearest branch is 25 miles away and I never visit. Taken all together bank transfer is my preferred option as it is safest for me - credit card transactions can be reversed, cheques bounced.

I would love to manage without a bank account - last year the bank blocked all my transactions due to an error (made by me) which they didn't tell me about and I only found out when someone asked me why my cheque had been returned by the bank (not bounced, returned). I was investigated for fraud and all my funds frozen until I was cleared. Even though I was cleared and compensated I think there must be a mark on my account as I tried to move my account elsewhere and was turned down.

BBGranniel the VAT threshold is not on 'earnings' it is on turnover, so if for example, a plumber installs your central heating and you pay him £8000 to include labour, materials, new boiler and radiator, then if he does one of those jobs a month his turnover is £96000 and he must. by law, be registered for VAT. What his profit is out of that is neither here nor there as far as VAT is concerned. Banks charge a lot of money to pay in cash, more than they charge to pay in a cheque, so anyone asking to be paid in cash has presumably no intention of paying it in! I am not saying that everyone receiving cash is on a tax dodge, but as s small business owner trying to compete legally against others who work for cash it can be rather galling. Any decent trader with a good reputation, good credit with a builders merchant, will give you an invoice which can be paid through online banking.

GillT57 I know all of what you mentioned having run a VAT registered business in the past, as I mentioned in my first response. However, I posted last response before changing 'earnings' to turnover.

I have no wish to hijack this thread into the whys and wherefores of other people's businesses, banking or book-keeping practises.

BBbevan asked a question to which she has received lots of interesting responses.

Very interesting thread here with plenty of facts from small business owners with experience of the systems. Bank transfers would be the most transparent and easiest way to pay. If cash is involved there are risks with forged notes (the cancer hospital I volunteer at picked up three £20 in one day). Also personal safety with withdrawals of cash is a concern. No-one pays their household bills, rent, mortgage etc in cash so why should this be any different? Of course it's a tax dodge.

I'm happy to pay in cash if I have an invoice or a signed and dated receipt. For larger amounts I'd rather pay by bank transfer so I don't have to collect and carry the cash around. The receipt is for my protection, to prove that I've paid and the date when they did the work in case of complaints. All the people who've done work for me advertise online and most have certificates of one sort or another. If they're cheating the taxman, that's their affair. The taxman cheats people by not informing them if they've overpaid and making it difficult to get rebates. Big companies earning thousands manage to evade taxes; wealthy people employ accountants to help them 'manage' their taxes. Start with them!

You may find it strange, but what does it matter how they are paid?

Cheques are a pain because you have to find a bank these days to pay it in, plus it can take 5 days to clear.

Online payments are fine, but I have found some people who pay by this method tend to pay when it suits them (I'm not saying you are like that) when I was a professional garden designer.

Nothing wrong with cash - as long as the job is done & you get a receipt.

Agree with jaycee5. Imposing a cashless society will make life difficult for many people - and in parts of S.W. Wales (where many people do not have all singing all dancing mobile phones/computers because reception is so poor) this is even more the case.If I pay for a service in cash I get a receipt.
With so many bank branches closing, it is more hassle than ever for some people to pay in cheques. Cheques are also increasingly disliked by younger, full time workers who may not be running their own businesses but who cannot easily get to a bank during opening hours. They much prefer bank transfers. However, with these you do have to be absolutely sure you - and other people involved in the transaction - have got the digits right - Santander once transferred my savings into some other customer's account this way....fortunately the other person was honest and I did not lose any money when the mistake was discovered....

I ran a small business for years before I downsized and am now a sole trader working from home. No more VAT. Contrary to belief the vatman didn't give any back to me, it was always a one way street as most of my income is service based.
Then I had the facility to accept credit cards etc. now I don't as it's too expensive. So I take cheques, cash and money transfer. It costs me money to pay in a cheque or cash so I don't take cheques for less than £10 but otherwise I don't care how I'm paid. That's because I account for everything I earn so I can sleep at nights.
Today, I was having a conversation with a friend who has just had her conservatory upgraded. I happened to say how amazed I was to discover how many bits of I.d. I needed to hire a car when she said she needed all sorts of I'd and an interview when she withdrew £8000 from her bank to pay for the conservatory.

I gave her a piece of my mind but it didn't seem to bother her, she was just happy to have a £500 discount.
That means that he has STOLEN money from all of us who pay tax. She said she won't get a receipt but will get a guarantee. I hope he gets caught.

£8000 cash for a conservatory is not a small business man saving himself the trouble of finding a bank to pay a cheque in, this is someone committing fraud. The victim of this fraud is you and me because it is HMRC who is being defrauded, HMRC who gather in the income to pay for all our public services. I am shocked at the number of people who are the first to moan about 'benefit cheats' and then happily defraud the exchequer themselves by paying huge amounts of cash to tradespeople. I run an honest business with a full audit trail because I am an honest person and because I like to sleep at night. We used to have a neighbour who boasted loudly and publicly about how much cash he ran through his business, how paying taxes and vat was for 'mugs', but also found time to moan about 'immigrants blocking the hospitals and the state of local schools. He just didn't see the connection. Apart from the moral issue, which I obviously feel strongly about, why should you, the customer, take the risk of withdrawing huge amounts of money from your bank? What if it is lost or stolen? The best way to pay is online banking. A tip; for a first payment to a new payee, send £1 first, then once you know it is safely received, send the balance to the account details that you now know is correct.

That's interesting Norah....we also have a Tradesman Entrance in our Edwardian house opposite our kitchen but i haven't opened it to a tradesman in years, the last tradesman to use it was the milkman who delivered milk some 30 years ago. Nowadays everyone comes to the front door. It just happened!

When it is small amounts like the window cleaner, the man who comes to do some gardening then cash is much easier for both of us and I am sure they are VAT registered from their business cards. However, under a certain threshold VAT is not payable anyway (is it £85,000?).
The plumber, the electrician, the painter and decorator have all been paid by cheque or more likely by bank transfer nowadays.

Sometimes they come to the tradesmen's entrance aka the back door.

good ideas re the bank transfer GillT57

GillT57 makes a good point regarding the £8k cash for the conservatory. How many consumer programmes do we see about people being bamboozled into paying huge amounts of cash to tradespeople. It is virtually impossible to pay that sort of cash into a bank without an audit trail as the bank has to prove they are not aiding money laundering. Sometimes we forget who is the customer in these transactions.

It is "normal" in west Wales; business over there is much different to elsewhere with a long tradition of beating the tax man and everyone else. Actually getting work done used to be the hardest part as they just did not seem to be bothered.

I always ask for written details of work agreed so both parties know what is agreed and no additional little bits of work slipped in without agreeing there is time and the additional cost. I could never keep large nor huge amounts of cash on me from the bank to home without feeling vulnerable and I'm surprised that people ask for such cash payments. If ever anyone wants part cash after we have agreed cheque then they cannot be paid.

I live in wales and has a husband who was self employed for many years and the reason we asked for cash on many occasions was the amount the banks charge for actually depositing cheques was almost a quarter of the value which when your a small concern can take most of your profit always paid the taxman, im sure you would be given an invoice if you asked for one.

My friend, the one who paid £8000 knows the chap who replaced her conservatory so trusts him to do a good job.
This IMO means she has paid him in cash before.
Marmee you have to pay to deposit cash too. Not as much as cheques though. I think I pay about 60p per cheque. Not much of a percentage on £8000!

I have never paid any small independent tradesperson anything other than cash. They've done the job so pay them so payment to them in definite and complete. Nothing to do with tax evasion.
I had a business that accepted cheques and you would be surprised how many of them "bounced". Once that happened you could more often than not wave bye bye to that money. Chasing payments takes time, they don't have that time. I don't blame them!!

Before now I have always been invoiced and did a money transfer. I now realise that in rural areas things like access to banks are difficult. I shall be much more relaxed about paying with cash now and less suspicious.

I know I'm an old cynic, but there is so much naivety on this thread. What does a trader do with cash? You cannot pay builders merchants etc etc in cash. The scarcity of banks is the reason NOT to pay in cash but pay using bank transfer!

Lilylilo, Our tradesman's entrance is used by all the people who work in the house. The window people, yard man, cleaner, repairs, painters, etc - all park car there, have a code to the gate. My home was built for my GPs quite a long time ago, the lane, land and gardens are conducive to leaving all the old back entrances well alone.

Exactly vickymeldrew. Do these tradespeople pay their builder's merchant or their van lease or their mortgage in cash? I think not. The excuse about bank charges? It costs between 60p and £1 to deposit a cheque, and considerably more to deposit a large amount of cash. The honest tradesperson is paid through bank transfer/online banking; no risk of bouncing cheques, full audit trail, no large amounts of cash lying around in the van to be nicked. As for £8000 in cash........I am astonished that anyone would be party to what is obviously a tax fraud, not a 'fiddle' a fraud.

I live in Pembrokeshire. We moved here 18 months ago, and have also had various builders in to do work on our property. We've not had anyone particularly ask for a specific method of payment, and often suggest cash ourselves as we sometimes get a discount for paying in this way. I think the only shop where I've ever been asked for cash is a clothes shop in Saundersfoot, where purchasing a dress for just under £50, I was told that they don't do credit cards - a bit awkward as I didn't have enough cash with me, but luckily my friend came to the rescue, and I paid her back later.

Can I just ask where you're located OP, as you never know, we could be neighbours and I would love to make some new friends.

Lots of people / shops don't take cheques but will usually accept a bank transfer. I don't mind paying cash but wouldn't be happy to be pressured into doing so

My hairdresser has just changed to a cash only salon as she was paying out large amounts each month to banks and credit card company. As a small company she was finding it difficult each month to pay these charges. She had only been cash only for a few weeks when the tax inspectors arrived one morning. Her books are done by an accountant and she does give us a receipt every time so she was ok. I think small businesses are struggling to pay all the extra charges imposed on them these days.