Recently, Inland Revenue wrote to us to remind us “undeclared cash in the construction sector remains a high priority for us”.
Failing to declare cash jobs is, of course, illegal.
One way Inland Revenue can discover the extent of cash income is to re-construct the taxpayer’s expenditure. Once they have a good idea of the extent of your expenditure, they can deduce your income. The system is surprisingly accurate. If they find a shortfall they then make their estimate of what the income ought to have been and you have to prove them wrong.
It should be obvious, anyone who has a cash business can be targeted by the Department. The simpler the business, the easier the target. Taxis and cafes would have to be sitting ducks. Tips must be included as taxable income.
Inland Revenue has asked us to remind our clients of the consequences of not declaring income. They say it “can include tax penalties, criminal convictions or their ability to contract for work – which could have a considerable impact on their business and personal circumstances. Let them [clients] know that IR is getting smarter at finding people who are not declaring all their income.”