Was paid 'cash' for job and tax problem now.

Ok I have a question in relation to payment by cheque for a “cash” deal.

Around 3 or 4 years ago while working for another company I carried out some paper work for a construction contractor and was paid a total of €7,000 in two cheques one for €5,000 and one for €2,000. I am not Vat registered nor do I have a C2, as I am not a company/business or a sole trader. I am just a normal paye worker. So this was a cash deal but I was paid by cheque as at the time he couldnt get the cash. I never heard from the contractor from then, until about 2 months ago he rang me saying he is currently being audited and that I owe him 35% of the money due to me, not having the correct rct/tax forms etc, he also asked me for an invoice and vat number neither of which I produced at the time of payment or since, as I do not have a vat number or any invoices or the like.

The contractor was/is aware this was a cash deal; however he did pay by cheque and I lodged them into my bank account. Where do I now stand with regard to this? Am I liable for any tax penalties or should I even declare anything? I have this guy hounding me now for the money as he says I am liable for the 35% and that he can follow the cheque and prove I lodged the money should I not pay him he is going to put the revenue onto me and so on. I did indeed lodge the money to my bank account and I have long since spent it.

I have been informed by some people not to be worried as the contractor is responsible for his own company’s cheques and so on with regard to stopping tax etc, and that I have no one to answer too and that if people start asking I should just deny getting paid anything as the cheque just had my name on it.

Anyone been in a similar position??

Basically he is the one with the problem and he knows it. He should have deducted 35% from the payment he made to you. The revenue will see this as he paid you for work totalling €9,450 and deducted 35% of this (€2,450) as a withholding tax, leaving you with a payment after withholding tax of €7,000. This 35% can then be set aside against any tax which you might have to pay as a result of this additional income.
e.g say you were on the top rate of tax of 41% (I think this was the rate at the time) then you would have to pay an additional 6%.
If he didn't withhold anything then he is liable for the 35%, not you.

granit said:

Ok I have a question in relation to payment by cheque for a “cash” deal.

Around 3 or 4 years ago while working for another company I carried out some paper work for a construction contractor and was paid a total of €7,000 in two cheques one for €5,000 and one for €2,000.

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What do you mean by "paper work"? Relevant Contracts Tax (35%) applies to payments to subcontractors in the construction section ie blocklayers carpenters electricians.

It does not apply to consultants like engineers, architects ect. So the nature of your work is very important.

Make sure you declare the money for Tax purposes, as the Builder has no doubt advised the Revenue of who you are and your details etc.

Any idea of the amount of income tax I will be liable for? All this guy would have is my mobile number, my name and my county. Would the revenue realy come chasing me?

The nature of the work was arch drawings / costings etc.. the paper work trail is very limited as I didnt want to but my job at the time on the line with nixer work.

Its not worth the risk. File a return for the relevant year - reduce the income by any expenses you incurred in doing the job

Higher rate of tax in 2007 was 41 % - & PRSI

I asked myself what was Granit doing "arch drawings / costings" for him for?

I've made some assumptions

Granit is/was one of the nixer merchants we in the profession hear so much about.
A Council draughtsman on PAYE who moonlights as an "architect" in the private sector.
To avoid allegations of a conflict of interest or corruption he was working outside his own county.

<nods>

Clever, as far as it goes.

====================================

Granit

Here is where you were not so clever my old son.
There was no risk to your job, as your employer had no need to know about it.
You could have retained an accountant to sort it out for you or talked to the Revenue.

I'm assuming that you didn't file a tax return accounting for your increased earnings that year.
Thus you very accepted a cheque and seem to have treated it as an untraceable cash payment.
Did you not realize that this would leave a clear paper trail through both his and your bank accounts?

The amount of information the builder has on you will be more than sufficient to trace you if the revenue feel you have defrauded them.
All they have to do is see the account where the cheque was paid into or call the bank that cashed it and ask to see the record of ID produced.

You owe the revenue the extra tax due in the context of your increased total earnings that year.
You are well past the point where a self-employed person would have been able to file a normal return.
The amount owed will automatically attract interest and penalties at IIRC 8% from the date it was due to be paid.

On the positive side, you appear note to have been acting as any kind of building contractor, but as a supplier of professional services.
I would be very surprised if were acting as an employee of the builder, since the wedge of money you were handed sounds more like professional fees.
Apart from the possibility of VAT and the tax due, a transaction like this this may normally be dealt with by the professional issuing an invoice to the builder.
This is the case whether you were acting as an architect or a quantity surveyor - many act like this for builders, but do so as a separate company or sole trader.

I would talk to a good accountant and/or a tax consultant as a matter of urgency if I were you.
If your gross salary rose above the limit at which you should charge VAT there may be more issues to address.


ONQ.

All advice on AAM is remote from the situation and cannot be relied upon as a defence or support - in and of itself - should legal action be taken.
Competent legal and building professionals should be asked to advise in Real Life with rights to inspect and issue reports on the matters at hand.

Thanks for the advice guys,

I will chat an accountant and see what the outcome is. But this issue of 35% that the builder is referring to, this could not be my problem as he was well aware of what way I was set up for doing the work.

I think the builder is now short on funds and maybe see's me as an easy target and hounding me for money? However if i am only responsible for my own tax affairs he is at a nothing getting on to me, or trying to worry me with the threats of the revenue.

If the revenue were to contact me with regard to this what is the process?

onq said:

If your gross salary rose above the limit at which you should charge VAT there may be more issues to address.

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VAT registration is compulsory once a certain level of turnover (currently €37,500 for services) is reached. Salary earnings are not taken into account for this purpose.

Declare your income for tax and pay it. Let revenue come back to you if they want about paying penalities etc.

Do not give anything back to the builder, his tax affairs are his problem.

Has anyone an idea of the amount tax I would be liable for on €7,000, it was around 2006/2007 when I was paid.

were you in the higher bracket for tax on your gross pay that year? -- also need to know exactly when it was paid

You will need to get professional advice on this - urgently, as others have pointed out. By doing nothing, you are exposing yourself to an additional penalty of up to 100% of the unpaid tax, in addition to interest.

granit said:

Any idea of the amount of income tax I will be liable for?

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WindUp said:

Higher rate of tax in 2007 was 41 % - & PRSI

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granit said:

All this guy would have is my mobile number, my name and my county.

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That, plus the paper trail of the cheques, is plenty of information to identify you.

granit said:

Would the revenue realy come chasing me?

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Certainly could, and (IMHO) certainly should. No-one can tell you for certain whether they actually will or not - but they are starting to look much more closely at PAYE workers doing nixers, so if this builder gives them your details I'd say there's a very good chance you'd get a letter one fine day (and given that you're talking about a bureaucracy, it won't necessarily be anytime soon!)...

The 35% point sounds like a red herring. You say that you did some paperwork. Assuming that you're referring to some kind of book-keeping service, that should be outside the scope of RCT.

However, you should (as others have alluded to) immediately seek professional advice from an ITI tax consultant and look to make a qualifying disclosure to Revenue in relation to your undeclared earnings.

And in future you should refrain from engaging in systematic tax evasion as when you do so, you're defrauding all of us.

thanks for the info guys.