HMRC has always had an uneasy relationship with cash. It’s tricky stuff, hard for the revenue to keep account of and – in the past – a popular way for cash-in-hand fans to avoid paying the full amount of tax owed.

In the bad old days builders, plumbers, antique dealers, all sorts of professionals used to appreciate being paid in cash, which they didn’t always declare as income. But how about everyday, ordinary shops? It looks like retail’s traditional propensity for cash purchases is putting shops at risk as HMRC mounts a fresh assault on cash payments, signalling the latest in a string of initiatives designed to crack down on undeclared pounds and pence.

HMRC analyses shop and restaurant returns

HMRC has started analysing tax returns from shops and restaurants, cross-checking them against credit and debit card payments. It’s a clear sign the tax man thinks shops and eateries are habitually not declaring all their cash payments. With around a third of transactions paid for in cash, they probably think it’s well worth pursuing.

What the rumours say

HMRC is thinking about investigating any business that takes cash for more than 90% of its sales. So are long, scary investigations on the horizon? As usual there are very real concerns about unnecessary investigations, which can easily spell financial disaster for small businesses, especially when they go on forever… which they frequently do.

Imagine your local corner shop. They probably take endless tiny cash payments for newspapers and sweets, milk, basic foodstuffs, stationery, tobacco, lottery tickets and so on. That’s the way the world works right now. So it it really fair to put them under the microscope simply because of the percentage of cash payments they take? It depends on how reliable the HMRC’s data is. And that’s a potential problem.

Is HMRC’s data reliable?

As a spokesperson for the Association of Chartered Accountants spokesperson told the Daily Mail, “HMRC has made it clear it is not 100 per cent sure how good its data is. The taxman needs to be sure business owners don’t end up being wrongly vilified.” Quite. If there are any doubts at all, businesses paid in cash should be left alone to do what they have always done, and the public should be left alone to pay for services and goods in any way they want.

Cash can’t be intrinsically dodgy

Back in 2010 the Treasury Minister had to backtrack sharpish after declaring that consumers had a moral obligation to avoid cash-in-hand payments. He said paying cash contributes to a £2 billion hidden loss to the treasury’s purse. But cash cannot be seen as dodgy per se. It is the currency of the land, it carries the Queen’s image, and everybody uses it on an everyday basis.

Perhaps HMRC would be better off focusing on big business tax evasion and tax avoidance rather than your local cafe, restaurant, pub or corner shop!