Construction News

Sat June 19 2021

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Scottish builders fear impact of cash-in-hand traders

1 Jul 13 Scottish building firms say that they are increasingly losing out to competitors that accept VAT-free cash-in-hand payments from customers.

Firms that do things by the book are warning that consumers are at risk from substandard and unsafe building works by ‘rogue traders’ who don’t 20% to the bill for VAT.

A survey by the Scottish Building Federation (SBF) found that more than half of member firms had been pushed by customers to ‘lose the VAT’ on at least one building job in the past year, and 42% had lost business because they refused to do so, costing them anywhere between £500 and £200,000.

SBF now plans to launch a campaign supported by HM Revenue & Customs to ‘Stop the Unfair Trader’.

The Scottish Construction Monitor is a quarterly survey of the SBF membership, comprising around 600 industry employers from Orkney to the Borders and ranging from sole traders to major national contractors.

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The survey also found evidence of growing industry confidence, putting a score on it up from minus 23 last quarter to minus 13 this time.

Commenting on the latest Scottish Construction Monitor, SBF managing director Vaughan Hart said: “In what remains a difficult economic climate, a growing number of consumers seem willing to ask their builder to ‘lose the VAT’ on a job – and to turn to the rogue trade if they don’t oblige. I think many fail to realise how risky this is. For one, evading tax is a criminal offence. Second, if you use a rogue trader, you will have very little come-back if they do a poor quality or unsafe job. If a builder is willing to evade their tax obligations, they’re more than likely to have cut other corners and almost certainly won’t be properly qualified or accredited.

“Of course, we’ve consistently argued that the Treasury should cut VAT on all building works to 5%. That would stimulate demand and boost the industry. Given the growing amount of tax revenue lost to rogue traders, it would also help legitimate building firms compete successfully against the ‘cash in hand’ market and boost Treasury coffers at the same time.”

Mr Hart concluded: “We need to act now to educate consumers about the risks of employing builders ‘cash in hand’ and the importance of employing a properly registered and accredited builder. We also need to support the growing number of very small building contractors in the trade to help them develop their businesses responsibly. By making sure everyone plays by the rules, we can stamp out the rogue practices that give the industry a bad reputation.”

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