Cash in hand - legal?

[ruth11]

I have this friend (really!) who was working for a company who made her redundant on 24th December. They have now realised that they can't function without her job role and have hired her back as a temp. No agency involved, this is direct. She's only getting 2 weeks work out of them but she's thinking it's better that nothing, as you would when you don't have a job. They're justifying it at the moment I think because one member of staff is off sick.
Trouble is, she's just told me that they've told her that they'll be paying her cash in hand, they will declare it so it's above board their end, but her tax and NICs etc will be her own responsibility. We're only talking about £600 total for the 2 weeks work.

Question is, is it ok for a company to pay someone cash in hand? Is it even possible to declare such a thing? I asked my accountant and she said they shouldn't do it, but I thought I'd guage opinion on here. Does "shouldn't do it" mean it's illegal to do it? Or what?

One other thing I'm not sure about, is that she's gone back in good faith, has no contract and doesn't know when she's going to get paid. Which all sounds a little bit dodgy to me. It sounds like they're going to try to get away without paying her at all. Which would be silly because it's possible that they may still need her back again in the future. After the 3 months is up following the redundancy, I can really see them asking her back because they've really been in the tulip since she left.

Her last day of the 2 weeks is tomorrow. Would it be worth me mocking up an invoice for her to leave with them so that she doesn't just leave? If that's not a good idea, how would you suggest she handle this?

She's so young and naiive, I really don't want to see her get shafted here.

Thanks guys.

[pmeswani]

I have this friend (really!) who was working for a company who made her redundant on 24th December. They have now realised that they can't function without her job role and have hired her back as a temp. No agency involved, this is direct. She's only getting 2 weeks work out of them but she's thinking it's better that nothing, as you would when you don't have a job. They're justifying it at the moment I think because one member of staff is off sick.
Trouble is, she's just told me that they've told her that they'll be paying her cash in hand, they will declare it so it's above board their end, but her tax and NICs etc will be her own responsibility. We're only talking about £600 total for the 2 weeks work.

Question is, is it ok for a company to pay someone cash in hand? Is it even possible to declare such a thing? I asked my accountant and she said they shouldn't do it, but I thought I'd guage opinion on here. Does "shouldn't do it" mean it's illegal to do it? Or what?

One other thing I'm not sure about, is that she's gone back in good faith, has no contract and doesn't know when she's going to get paid. Which all sounds a little bit dodgy to me. It sounds like they're going to try to get away without paying her at all. Which would be silly because it's possible that they may still need her back again in the future. After the 3 months is up following the redundancy, I can really see them asking her back because they've really been in the tulip since she left.

Her last day of the 2 weeks is tomorrow. Would it be worth me mocking up an invoice for her to leave with them so that she doesn't just leave? If that's not a good idea, how would you suggest she handle this?

She's so young and naiive, I really don't want to see her get shafted here.

Thanks guys.

At the moment, I am doing some work for a friend of mine. It's as good as cash in hand work. I did this last year as well. I raised an invoice and got paid. Declared it on my Self Assessment and provided copies of the invoice where necessary. No contract exists.

Whether it is legitimate from your friends ex-employers point of view.... that's something I can't answer. She can present them with an invoice... whether she will get paid, is up to the company. They are not obligated to pay as no contract is in place. One has to rely on good faith.

[tim123]

I have this friend (really!) who was working for a company who made her redundant on 24th December. They have now realised that they can't function without her job role and have hired her back as a temp. No agency involved, this is direct. She's only getting 2 weeks work out of them but she's thinking it's better that nothing, as you would when you don't have a job. They're justifying it at the moment I think because one member of staff is off sick.
Trouble is, she's just told me that they've told her that they'll be paying her cash in hand, they will declare it so it's above board their end, but her tax and NICs etc will be her own responsibility. We're only talking about £600 total for the 2 weeks work.

Question is, is it ok for a company to pay someone cash in hand? Is it even possible to declare such a thing?

.

If they are "counting" her as self employed, then yes, she can declare the wages as extra income on her tax return. She should keep all the documentation that the company give her.

However, this doesn't cover the NI that should have been paid. But this is the company's problem. Unless, that is, she needs these wages to take her over the minimum for the year so that it counts towards her pension (if such a thing bothers her).

And there is the little problem of signing off and then signing back on again! Can't help here, have no personal experience of this.

HTH

tim

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I have this friend (really!) who was working for a company who made her redundant on 24th December. They have now realised that they can't function without her job role and have hired her back as a temp. No agency involved, this is direct. She's only getting 2 weeks work out of them but she's thinking it's better that nothing, as you would when you don't have a job. They're justifying it at the moment I think because one member of staff is off sick.
Trouble is, she's just told me that they've told her that they'll be paying her cash in hand, they will declare it so it's above board their end, but her tax and NICs etc will be her own responsibility. We're only talking about £600 total for the 2 weeks work.

Question is, is it ok for a company to pay someone cash in hand? Is it even possible to declare such a thing? I asked my accountant and she said they shouldn't do it, but I thought I'd guage opinion on here. Does "shouldn't do it" mean it's illegal to do it? Or what?

One other thing I'm not sure about, is that she's gone back in good faith, has no contract and doesn't know when she's going to get paid. Which all sounds a little bit dodgy to me. It sounds like they're going to try to get away without paying her at all. Which would be silly because it's possible that they may still need her back again in the future. After the 3 months is up following the redundancy, I can really see them asking her back because they've really been in the tulip since she left.

Her last day of the 2 weeks is tomorrow. Would it be worth me mocking up an invoice for her to leave with them so that she doesn't just leave? If that's not a good idea, how would you suggest she handle this?

She's so young and naiive, I really don't want to see her get shafted here.

Thanks guys.

I would strongly recommend that before any work takes place, that there is a contract in place clearly stating the terms of the assignment and the responsibilities of both parties. Failure to do so is leaving your friend wide open to dispute and potential non payment.
With regard to the employer, this is very strange and rather foolish of an employer to even suggest 'cash in hand'. IR35 issues aside, the employer has a legal responsibility to deduct tax and NI from its employees, which from the information you have provided, your friend would be viewed as an employee if this were ever investigated by HMRC.
As long as you declare the income on your self assessment, then you are doing what you can with regards to declaring all your income. Whether you categorise it as employed or self employed income is another matter, BUT, l suspect your 'employer' could be in a little trouble, potentially.

[IR35 Avoider]

I can't see a tax problem for her, as long as she declares it on her tax return. She should probably register as a sole trader.

It's actually the company that's taking a risk - if HMRC investigated and decided she was an employee (not self-employed) the company would have to cough up tax on what she was paid.

[ruth11]

Thanks for the replies.

Registering as self employed or sole trader or whatever is something she really doesn't want to do. As is having to fill out a Self Assessment form. She's only 22 and has no intention of being any of those things, she just wants to work.

Trouble is, she only told me about this yesterday and tomorrow is her last day there. I've stressed that she needs to get something in writing from them to prove that she worked there otherwise she's running the risk of not being paid with no way to appeal to get it.

I really wish there was something I could do to help, but I reckon it's a bit late now.

[ruth11]

If they are "counting" her as self employed, then yes, she can declare the wages as extra income on her tax return. She should keep all the documentation that the company give her.

However, this doesn't cover the NI that should have been paid. But this is the company's problem. Unless, that is, she needs these wages to take her over the minimum for the year so that it counts towards her pension (if such a thing bothers her).

And there is the little problem of signing off and then signing back on again! Can't help here, have no personal experience of this.

HTH

tim

The company have so far given her nothing at all! I have said that before she leaves on Friday she needs something in writing to say that she worked there and that they will pay her x amount otherwise I'm willing to bet she'll get nothing. Lets hope that she listens to me.

There's no signing on and off to be done. She didn't sign on when she left the first time.

[pmeswani]

Thanks for the replies.

Registering as self employed or sole trader or whatever is something she really doesn't want to do. As is having to fill out a Self Assessment form. She's only 22 and has no intention of being any of those things, she just wants to work.

Trouble is, she only told me about this yesterday and tomorrow is her last day there. I've stressed that she needs to get something in writing from them to prove that she worked there otherwise she's running the risk of not being paid with no way to appeal to get it.

I really wish there was something I could do to help, but I reckon it's a bit late now.

If she doesn't get paid, then she will have to put it down to experience and learn from it. However, if she does, then doing a tax return is not that bad, as long as remembers to do it when requested by the Tax people. (The chances are that the company will inform the Tax office that such work has been carried out). I'm assuming she will be signing on after she finishes tomorrow? If so, I would explain to the Benefits Office (or whatever they are called these days) that she did some casual work and declare any monies she earnt prior to signing on.

[pmeswani]

I can't see a tax problem for her, as long as she declares it on her tax return. She should probably register as a sole trader.

It's actually the company that's taking a risk - if HMRC investigated and decided she was an employee (not self-employed) the company would have to cough up tax on what she was paid.

I don't think it would be entirely necessary to register as a sole trader. In any case, it would be a bit late now... should have done it before she started the casual job. I am going to guess that she will be signing on, and as long as she declares it before she signs on, it may be ok.

[NotAllThere]

... doing a tax return is not that bad, as long as remembers to do it when requested by the Tax people....

Not quite. If you've income that needs to be taxed, you're obliged to request a tax return. The onus is on you. Not HMRC.