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Tax queries

Friend of mine used to run a fried chicken takeaway had a inspection of his book for the pasy year.

His staff used to buy stuff from his supplier contacts using his account number, as he never used to receive statements from them (although he was aware of this) he did not know how much were these private purchases, the HMRC now claims that all the purchases were his business use and therefore uplifted the sales and therefore would lead to potential VAT liability.

but he is determined to stick to that these purchases were not for his business (he obtained letters from his previous staff, admitting that they were used but stuff from suppliers using his name to take advantage of the special offers etc.

Will HMRC accept this?

any comments will be appreciated.

thanks for your time

G

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08th Feb 2013 13:11

Look at the evidence

First, may I say that I am astonished how many questions on this site purport to be about "friends".  I wonder why the "friends" don't ask the questions?

Look at the evidence.  HMRC has good evidence from a third party that more goods - presumably, food for resale - were supplied to your "friend" than he has put through his accounts.  What evidence can your "friend" produce that he has included everything that was for his business?  Apparently not any statements from the supplier on which he had marked the private purchases by his staff.  On what did he base his figure for business purchases?  Cheque payments, perhaps - if so, can he produce the cheque stubs and bank statements to demonstrate that he has included everything paid by him to the supplier?  This would need to cover all bank accounts used by him, whether ostensibly for business or private purposes, to show that he was not hiding payments in a personal bank account.  If the supplier was paid in cash, your "friend" has a problem.

Does your "friend" have good records of his business takings, such as till readings?  Can he demonstrate that sales were always rung up?  Can he show that he banked all his recorded takings every day?  If so, he could challenge any increase to his sales figures.  If he did not use a till, he has a problem.

You mention only VAT, but this is also likely to lead to increased income tax.

 

Thanks (3)

I've got a friend...

... with genital warts.  They're really painful... apparently! :)

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By BKD
08th Feb 2013 13:55

Why doesn't your "friend" ...

... speak to his accountant?

My friend won the lottery last year. Sadly, I have no need to use " ".

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08th Feb 2013 15:17

It worries me...

..not the question, although it is clearly worrying, and if I were the HMRC officer involved I'd be taking the purchase orders and applying a mark up like s/he has. Surely if this is one chicken takeaway then there can't be that many staff and purchase of private food couldn't be that significant. I saw the other day that average family weekly shop is around £75 so with say 3 staff at any one time, if they did all their shopping through the supplier contracts you could get up to maybe £8K or £9K of extra VAT over 4 years. But how likely is it that they did all their own shopping through the contracts, and how much of the purchases would be stuff not relevant to a chicken takeaway anyway, beer, chocolate, cornflakes etc. Surely since HMRC have got hold of the suppliers records, your 'friend' could get hold of them as well and attack the assessment by excluding things they don't sell, as well as using Euans useful advice.

Anyway back to what worries me...

It worries me that at least 2 people have thanked George for his genital warts, sorry his 'friends', genital warts. (Unless perhaps it's friends of a 'friend' being grateful for the warning.)

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By Glennzy
08th Feb 2013 20:57

This should be a lesson to your "friend"
About keeping decent books. I find it hard to believe that he allowed staff to make purchases on his trade accounts and did not check his statements. How does he not know that he has paid for his staff purchases. I am aware this sort of thing goes on but the supplier would normally insist on cash payments for any extras supplied by staff so would not show on the statements. If your friend is as innocent as he says he could prove the extra payments are not his as Euan says by looking at his bank statements. I suspect as its a cash buisness that he has also paid the supplier cash and put the extra invoices through and claimed tax relief on them so is in a bit of a mess. Your friend probably is not telling you the whole picture, as other things can be checked liked packing boxes used etc and the best thing he can do is appoint a decent tax advisor to get this settled before he ends up with large penalties for not complying with HMRC

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