It’s not unknown for builders to offer a discount to customers able to pay cash.
Grateful homeowners rarely question how the arrangement works – even if they have a sneaking suspicion it involves a tax dodge.
But the cash-in-hand economy is costing the Treasury £2 billion a year which could be spent on public services or lead to lower taxes, according to a new Commons inquiry.
MPs including Philip Dunne (Con Ludlow) called for a crackdown on tax-dodgers, with tougher penalties.
The worst culprits included self-employed builders and decorators, MPs said. But others failing to declare earnings included internet traders, who sell possessions on eBay or set up one-man businesses using services such as PayPal.
Buy-to-let landlords, who may rent a property or two on top of their job, are also among offenders, the study warned. There are no reliable estimates of the tax lost through the hidden economy but it could be over £2 billion a year and involve around 2 million people, MPs said.
HM Revenue & Customs, responsible for collecting tax and cracking down on evasion, spent £41 million in 2006–07 encouraging people and businesses into the formal economy, and detecting and imposing sanctions.