HMRC’s latest research, Uses of Cash and Electronic Payments, reveals that the majority of businesses that currently do not offer electronic payments, such as debit/credit card transactions and contactless payments, are unlikely to change their approach and will opt to solely stick to cash payments.

Around 17% of businesses report that cash is most used by their customers and 18% report cheque, meaning that nearly a third of consumers do not use electronic payments. Instead, small businesses report that online transfer including PayPal is most used by their customers and is most preferred by small businesses.

The majority of respondents to the survey that do not currently offer electronic payments are unlikely to change their approach, 79% of these businesses admitted they would ‘definitely not’ offer debit/credit card payments, or contactless (81%) or mobile payments (79%) over the next two to three years.

However, the sole use of cash is low with nearly a third (29%) of small businesses that took part in the research admitting that they do not accept cash.

The Bank of England said: ‘Cash continues to be important in the UK, with demand for Bank of England notes growing faster than nominal GDP. There is now the equivalent of around £1,000 in banknotes in circulation for each person in the UK.’

The decision consumers make as to whether to pay by cash or electronically depends on the size of the transaction. Purchases under £10 are most likely to be paid by card but regular transactions, bills and larger transactions are paid by direct debits, card payments or by online transfers.

Both businesses and consumers have agreed that the use of cash and cheque will decline in the future, with consumers moving towards more electronic payments. In the survey, 43% believed that there would be a decline in the number of cash transactions with their customers, but half expect it to remain the same.

There are situations, such as paying large amounts of money for a service, where consumers feel less comfortable paying in cash because there is no trail of the purchase and no resource to refer to if a problem arises with the purchase. Yet, people claim that by paying in cash they are able to keep a track of what is coming in and what is going out easier as they do not have to wait for payments to be taken from their accounts.

The government’s planned reforms to overhaul the current tax system making it entirely online, known as Making Tax Digital is set to come into place from 2017. For businesses it is not applied until 2018 and microbusinesses with a threshold under £10,000 do not have to implement it at all.

Already, the majority of businesses in HMRC’s review (93%) submit their tax returns online but of those 45% do not use software.

Despite this, smaller businesses are worried about Making Tax Digital as they feel HMRC has not taken into account small business owners’ IT capabilities and the lack of internet in more rural areas.

Most businesses would change their view and consider adopting electronic payments, including more niche payment methods such as Apple pay, if there was a consumer demand for them.

HMRC’s research, Uses of Cash and Electronic Payments, is available here.