The Bank of England reported in their Q3 Quarterly Bulletin that for spontaneous payments (for goods and services purchased at the point of sale, for example from retailers either face to face, online or by telephone), 52% of the volume of payments are made in cash and this represents a gradual, relative decline in usage. The Absolute value of such cash payments has been quite stable over the last 15 years and stands at less than 50% of all consumption.
For regular payments, such as standing orders or periodic household bills, Payments UK data indicates that technological developments have reduced physical exchanges of money, with only 10% paid for with cash in 2014.
Our friends at HMRC are taking an interest in this topic, as somewhat belatedly perhaps, they have realised that the remaining cash based economy is ripe pickings in their quest to reduce tax evasion.
In fact there is a current consultation on this issue. HMRC issued a call for evidence entitled “ Cash, tax evasion and the hidden economy” on 25 November 2015. Deadline for responses is 27 January 2016. The consultation invites comments from interested parties on the following six questions:
- What does the relative decline in cash usage mean for tax non compliance in the future?
- What evidence is available about the use of cash to conceal transactions within the hidden economy?
- To what extent does cash facilitate tax non compliance?
- What evidence is there that the relative trend away from cash to other payment methods will or will not continue?
- Considering the rapidly changing payment landscape, what challenges and opportunities does further innovation raise for:
- HMRC’s compliance activities?
- HMRC’s customers?
Practitioners who want to respond can read the call for evidence document at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/479468/Cash_call_for_evidence.pdf