According to the Association of Chartered Certified Accountants (ACCA) the UK shadow economy was worth over £200bn in 2017, which is around 11.3 per cent of UK GDP*. Obviously, with increased regulation of the banking sector and HMRC powers to access banking records, the shadow economy is heavily dependent on cash. However, fear of contracting Coronavirus through handling money has accelerated the long-term trend away from cash.
People who preferred not to use cash prior to Coronavirus now find it socially acceptable to pay very small amounts in shops using debit or credit cards. Many shops actively state that they prefer not to take cash now due to the risk of virus transmission. As such, it is not unusual to find people who do not carry cash at all. In fact, increasingly they do not use cards preferring to use their mobile phone to make payments – I suppose mobile phones are made of plastic…
As we move away from cash, some of the shadow economy is finding it hard to resist the move to cards. Businesses that may have been able to hide their true takings historically will not be able to do so if they are to survive and prosper. Such businesses may grudgingly be joining the tax club – they may even be having to charge VAT (and account for it to HMRC)!
Businesses that may appear to have had a good pandemic, economically at least, could be called on by HMRC to explain what their good fortune is down to. Could the cash economy prove to be collateral damage of COVID-19? We shall see.