Customer Wants Invoice for Less Than Actual Price: Why You Must Refuse
The HMRC risks of fake invoices, why "helping customers save tax" destroys your business, and the exact scripts to refuse without losing the sale.
Customer says: "Can you invoice me for £3,000 instead of £5,000? I'll pay the full amount in cash. Just helps with my tax situation."
Here's why this is fraud, the HMRC penalties that will destroy your business, and the exact scripts to refuse without losing the customer or sounding preachy.
Why customers ask for lower invoices (understanding the ask)
Customers request fake invoices for several reasons—all illegal, none worth the risk:
Common fake invoice scenarios
1. Rental property tax avoidance. Landlord wants to claim expenses against rental income but keep some cash unreported.
2. Capital gains reduction. Homeowner selling property wants inflated improvement costs to reduce capital gains tax (or deflated invoice to reduce stamp duty).
3. Insurance claims. Customer wants invoice higher than actual cost to inflate insurance payout.
4. Personal tax evasion. Self-employed customer wants to pay you cash off-the-books and reduce their own declared income.
5. Divorce/legal proceedings. Spouse hiding assets or exaggerating expenses for family court purposes.
Most customers asking for this don't realize they're asking you to commit fraud. They think "everyone does it." They're wrong.
The legal consequences for you (HMRC doesn't mess around)
Issuing fake invoices is tax fraud. Here's what happens if HMRC catches you:
| Offence | HMRC penalty | Additional consequences |
|---|---|---|
| Issuing false invoices (fraud) | Up to 7 years imprisonment + unlimited fine | Criminal record, business closure, professional license revoked |
| Deliberately underreporting income | 100% of tax owed + 30–100% penalty + interest | Increased audit scrutiny for years, public naming and shaming |
| Failure to keep accurate records | Up to £3,000 per tax year | Evidence used against you in prosecution |
| VAT fraud (fake VAT invoices) | 100% of VAT evaded + up to 100% penalty + criminal prosecution | VAT registration cancelled, reputation destroyed |
| Conspiracy to defraud (helping customer evade tax) | Criminal prosecution as co-conspirator | Joint liability with customer for their tax evasion |
HMRC's "Connect" system cross-references invoices, bank deposits, supplier records, and customer claims. Mismatches trigger audits. You will get caught.
Why fake invoices are business suicide (beyond HMRC)
Even if you think you won't get caught, fake invoices destroy your business in other ways:
Hidden costs of fake invoicing
Your accounts become worthless. Can't use them for loans, mortgages, or selling your business because the numbers are fiction.
Customer has leverage over you forever. They can blackmail you: "Give me a discount or I'll report you to HMRC."
Insurance becomes void. If you make a claim and insurers find fraudulent records, they refuse to pay and cancel your policy.
You lose legal protections. Can't sue for non-payment without revealing the fake invoice. Can't enforce contracts based on fraud.
Reputation destruction. One customer tells another. Word spreads. You become known as dodgy. Professional customers won't touch you.
Bottom line: The short-term gain of keeping one customer happy is never worth the long-term destruction of your business.
How to refuse politely but firmly (without losing the sale)
Most customers respect a firm no if you deliver it professionally. Here are scripts for common scenarios:
Tone is everything: No judgement, no lectures, just clear boundaries. You're protecting both of you.
Legitimate tax-saving alternatives you CAN offer
You can't help customers evade tax, but you can help them structure payments legally:
These alternatives show you're willing to help within legal boundaries—builds trust without breaking the law.
When they insist or threaten (protecting yourself)
Some customers won't take no for an answer. Here's how to handle escalation:
| Customer response | What it means | Your action |
|---|---|---|
| "I'll find someone else who will" | Attempting to pressure you by threatening to walk | "I understand. I hope you find someone who works that way, but it's not me." |
| "I'll pay extra if you do it" | Attempting bribery | "I appreciate the offer, but I can't issue false invoices at any price." |
| "Everyone else does this, don't be difficult" | Trying to make you feel unreasonable | "I can only speak for my business. This is my policy and it's not negotiable." |
| "I'll leave a bad review if you don't help me" | Blackmail | Document threat. Respond: "I won't be threatened into illegal activity. The job stands as quoted or we part ways." Report review as blackmail if posted. |
| "Fine, just pay me cash and don't invoice at all" | Asking you to go completely off-books | "I declare all income and issue invoices for all work. If that doesn't work for you, we're not a good fit." |
Key principle: Losing one dodgy customer is better than losing your business, your license, and your freedom. Walk away without guilt.
Do you need to report customers who ask? (your legal position)
You're not required to report customers who ask for fake invoices, only those you actually help defraud HMRC. But consider:
When to report vs when to just refuse
Just refuse + walk away: Customer asks once, you refuse, they accept it and move on. No reporting needed.
Document the request: Customer is persistent or aggressive. Send follow-up email confirming you refused. Protects you if they later claim you agreed.
Consider reporting: Customer threatens you, offers bribes, or tries to implicate you in ongoing fraud scheme. Report to HMRC fraud hotline: 0800 788 887.
Definitely report: Customer claims other traders are doing this for them (HMRC wants to know). You suspect organised fraud ring. Customer is a repeat offender approaching multiple traders.
Reporting protects you and the industry. Dodgy customers and complicit traders make life harder for everyone doing it properly.
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