Investigation on Eat Out to Help Out

HMRC forcing the client to send the proof of claims by email

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Hi everyone. HMRC is investigating a client over their Eat out to Help Out claim. We have no problem posting the receipts but they insist it has to be scanned and emailed. Now as the client is a large restaurant, we are talking about thousands of pages.

They emailed us:

Thank you for contacting the Eat Out to Help Out Compliance Team. It is not possible to send in the requested documents via post, this needs to be done via email.It is in your best interests to make a voluntary disclosure. To do this, go to gov.uk and search for “Eat Out to Help Out overclaims” to make a disclosure. We will then tell you how to pay back what you owe. Failure to make a disclosure will result in formal action taken against you, possibly involving statutory interest charges and penalties.  

Now im sensing, HMRC has already decided that they want the money back but obviously we have checked every single claim and everything matches with clients records. I want to refuse communication via email and stick to our original request from them to give us an address where all these can be posted to them.

Do i stand a chance?

Replies (27)

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By Paul Crowley
16th Dec 2020 13:37

Odd
To date it has always been me trying to get HMRC to use email for enquiry work and HMRC refusing
Given the cost of the work involved I would look to resist. Not just that but to request precise details as to why HMRC consider that there are errors.

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RLI
By lionofludesch
16th Dec 2020 13:39

Here come the bully boys........

I like how they have already got you logged in as a voluntary disclosure case.

I don't think I'd be sending in thousands of receipts. Nor does it seem to be a reasonable request. If you're confident of your position, tell them to come and have a look at any agreed time within normal business hours.

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Replying to lionofludesch:
picture of a mushroom
By mushroom_dept
18th Dec 2020 11:02

with regard to getting HMRC to visit in person:
I have just had a call from HMRC who want to do an audit of our import procedures. The guy who phoned me said they would usually do this in a face-to-face visit but due to Covid they are 'not allowed' to come out to visit premises so it will all be done by email/phone conversation. I imagine this will apply to compliance visits in general.
n.b. I haver no doubt that that this is genuine as I have now received the first stage of setting up communication which is an explanation of HMRC's email communication protocol.

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Replying to mushroom_dept:
RLI
By lionofludesch
18th Dec 2020 11:18

Still doesn't make scanning and emailing thousands (or, indeed, hundreds or even dozens) of documents a reasonable request.

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By Wanderer
16th Dec 2020 13:48

Side story.

Once took over a client who then had an enquiry opened into the accounts / return prepared by their previous adviser.
Reviewed the papers and IR may have been correct in raising an enquiry & wanting to look into it further. They asked for copy invoices.
Tasked a staff member to photocopy approximately 2,500 invoices onto bland, A4 paper and hand deliver them to the tax office (local offices in these days).
48 hours later these were all hand delivered back by IR staff member with an accompanying letter that no amendments necessary.
Doubt if they had even be looked at!

Sometimes it can work to give HMRC exactly what they ask for!

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By carnmores
16th Dec 2020 14:00

choose a time period at random, say a week, and send them in the data for that period

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Replying to carnmores:
By RM and Co
16th Dec 2020 14:15

Initially we told them to pick a day randomly and we send them the info. They did and we forwarded everything needed. They need to see every single bill sent to tables. Thats the problem. Small printed receipts say about 100 of them each day

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By Mr_awol
16th Dec 2020 14:03

If it is a large restaurant and involves thousands of pages, then i doubt very much these are all hand-written. Surely they have been produced by a computerised system and surely therefore you just export them (or a report thereon) from that system.

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Replying to Mr_awol:
By RM and Co
16th Dec 2020 14:18

They need to see every single bill sent to tables. And we are talking about small pieces of paper that are handed over to me. I cant scan them one by one. Its more like an excuse to be honest to get the money back from businesses

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Replying to RM and Co:
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By Mr_awol
16th Dec 2020 14:39

Yes but where do/did those individual little pieces of paper come from?

If they were printed from a POS system then surely they can be reprinted in bulk, exported to (either one giant or many small) PDF report(s)?

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paddle steamer
By DJKL
16th Dec 2020 14:05

Consider the integrity of the data being asked to be sent, consider your client's responsibilities as manager of that data, also to be totally sure ensure HMRC are here HMRC and not somebody posing as HMRC.

Thanks (3)
Replying to DJKL:
RLI
By lionofludesch
16th Dec 2020 14:44

That's a possibility, bearing in mind HMRC's reluctance to use email. Hard to think what the scam might be though.

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Replying to lionofludesch:
paddle steamer
By DJKL
16th Dec 2020 15:24

No idea, could these table receipts show customer credit card numbers for instance?

Certainly if they show any customer identifiers I would not be sending via an unsecure route. It might help if the OP indicated what precisely on these receipts HMRC want to see.

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By carnmores
16th Dec 2020 15:39

I have been looking at a few hospitality sites and they feel that HMRC are at present looking at claims where there is conflicting data. are you absolutely sure that have got it right?

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By SteveHa
16th Dec 2020 16:01

I'd tell HMRC to go whistle, and if they continue to insist on email, you insist on the statutory reference that permits them to.

They'll back down quickly enough, then.

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Replying to SteveHa:
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By richard thomas
16th Dec 2020 20:33

As always with my posts I set out the law and what it requires. Whether relying on the law is a sensible tactic is for others to say.

An investigation to the EOHO scheme is no different from any other tax investigation. The law is to be found in Schedule 16 FA 2020. What a person who has made an incorrect claim for a discount is obliged to do is to (a) notify liability or (b) if they have received a notice to file for 2020-21 (or the CT period covering the scheme) is to include the amount overclaimed on the return as an amount of income tax.

Obviously that is not going to happen for some time. HMRC are therefore seeking information in advance of the self-assessment. The only power which might conceivably allow them to enforce such a request is Schedule 36 FA 2008.
Section 106 and Schedule 16 FA 2020 do not modify or amend Schedule 36, so it applies as usual. HMRC are entitled to

“by notice in writing require a person (“the taxpayer”)—

(b) to produce a document,

if the … document is reasonably required by the officer for the purpose of checking the taxpayer’s tax position.“

and

“tax position”, in relation to a person, means the person’s position as regards any tax, including the person’s position as regards—

(a) … future liability to pay any tax,”

At present if no Schedule 36 notice has been given there is a voluntary request. You can ignore it or comply with it. If you comply with it you are not required to use email, especially if you need to protect the data of customers of your client. Though if you send the paper documents are you not equally compromising their data?

Only if a Schedule 36 notice is given can you be required to use the method specified by HMRC in the notice (see paragraph 7(1)(b) Schedule 36) and to produce the document at the “place” where HMRC reasonable specify (paragraph 7(2)). Since it is a “place” it must have a postal address and not an electronic address.
You may appeal against the notice unless it (a) was agreed to by the Tribunal or (b) it represents “statutory records”. Assuming the client claimed to use the reduced rate of VAT then the documents requested are probably statutory records. But there is a difference of opinion in the FTT about whether “statutory records” is limited to the records required for the relevant tax, or whether it is the records for any tax the taxpayer happens to be subject to, even if that is not the subject of the enquiry. I am in the former school of thought but others differ (eg Anne Redston). If I am right then the statutory records are those required under s 12B TMA (non-company ) or paragraph 21 Schedule 18 FA 1998 (company).

So you’ll probably have to give the documents to HMRC if they issue a Schedule 36 notice, but you can, it seems to me, require them to tell you at what place that can inspect them.

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Replying to richard thomas:
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By carnmores
16th Dec 2020 21:03

Fantastic reply Richard thank you for taking the time. Nick

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Replying to richard thomas:
By RM and Co
17th Dec 2020 09:22

Thank you so much for taking the time to explain in such depth. Treasure.

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By Malcolm McFarlin
17th Dec 2020 10:47

You may be best to have an honest discussion with your client and ask if their records are accurate and they have given you all of the correct data. You could be leaving your client open to additional penalties for lack of co-operation, production of information etc if it is eventually found that they have over-claimed. You could compare sales from the 'eat out to help out' period to gauge if they are not hugely disproportionate to previous VAT quarters.

If you are still confident that the records are correct then Richard Holmes advice is good to follow.

Thanks (1)
Replying to Malcolm McFarlin:
paddle steamer
By DJKL
18th Dec 2020 11:20

Does comparing periods really work here?

The scheme itself was intended and designed as a behaviour modifying piece of legislation, accordingly I would expect variance from any periods where the scheme did not exist, in fact if there was no such variance from any pre Covid period the scheme would have been 100% successful in its purpose.

Covid muddies the water so much I am not sure how useful any statistical analysis would really be except in telling one that Covid itself has modified outcomes, which we already know.

Thanks (1)
Replying to DJKL:
RLI
By lionofludesch
18th Dec 2020 11:28

DJKL wrote:

Does comparing periods really work here?

The scheme itself was intended and designed as a behaviour modifying piece of legislation, accordingly I would expect variance from any periods where the scheme did not exist, in fact if there was no such variance from any pre Covid period the scheme would have been 100% successful in its purpose.

Covid muddies the water so much I am not sure how useful any statistical analysis would really be except in telling one that Covid itself has modified outcomes, which we already know.

I agree. It's impossible to draw conclusions. Some folk wouldn't have eaten out at any price because they were worried about Covid. Others will have piled in for the half price offers. There's no precedent so it's hard to say which one outweighed the other.

However - there were plenty of eatouteries saying you need to book which suggests trade was up rather than down. On the other hand, you might have needed to book because they had less tables, which suggests trade was down.

Take Your Pick, as Michael Miles used to say.

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Replying to lionofludesch:
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By Malcolm McFarlin
18th Dec 2020 12:01

There are multiple checks you can carry out. For instance you would expect to see an increase in food purchases; were extra staff employed to cover the period. How many covers can the restaurant take i.e. is it physically feasible for the restaurant to accept the number of customers claimed if the diners are socially distanced? Has there been an increase in staff wages to meet the demand. Have the bills been artificially split to increase the number of diners? It is not unknown for some restaurants to rewrite bills at the end of the evening. Credit card receipts can be checked to bills although I appreciate some bills are divided and paid by several credit cards.

I have seen so many scenarios having worked as HMRC VAT investigator for over 20 years and subsequently 20 years advising clients subject to tax investigations.

HMRC do act on tip offs from disgruntled employees.

HMRC do sometimes wrongly select eating establishments for investigation but that, in my experience, is quite rare.

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By Mallock
19th Dec 2020 11:17

My immediate thought, given HMRC's assertion that the claims are incorrect, was that a member of staff must have given HMRC information about incorrect practices.
I heard rumours of all sorts of scams used by restaurateurs during the Eat Out to Help Out period. What does the GP% look like?

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Replying to Mallock:
VAT
By Jason Croke
22nd Dec 2020 16:17

Mallock wrote:

My immediate thought, given HMRC's assertion that the claims are incorrect, was that a member of staff must have given HMRC information about incorrect practices.
I heard rumours of all sorts of scams used by restaurateurs during the Eat Out to Help Out period. What does the GP% look like?


It could be that looking at historical VAT or corporate tax returns, HMRC will have a rough idea of levels of turnover for the business (and the sector as a whole) and HMRC probably also have a % they have calculated as to what is deemed acceptable uplift in sales for EOHO (much like HMRC have a % margin of error for till errors before they smell a rat).
Thanks (0)
Replying to Mallock:
VAT
By Jason Croke
22nd Dec 2020 16:17

Mallock wrote:

My immediate thought, given HMRC's assertion that the claims are incorrect, was that a member of staff must have given HMRC information about incorrect practices.
I heard rumours of all sorts of scams used by restaurateurs during the Eat Out to Help Out period. What does the GP% look like?


It could be that looking at historical VAT or corporate tax returns, HMRC will have a rough idea of levels of turnover for the business (and the sector as a whole) and HMRC probably also have a % they have calculated as to what is deemed acceptable uplift in sales for EOHO (much like HMRC have a % margin of error for till errors before they smell a rat).
Thanks (1)
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By Mr J Andrews
19th Dec 2020 11:27

Clearly HMRC have spelled out ''.....Guilty until proven Innocent....'' in this scenario; totally alien to the Care and Management provisions of the 1970 Taxes Management Act which Revenue officers must follow. A formal complaint is therefore in order.
A further formal complaint into the unreasonable request for information is called for.

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By fawltybasil2575
19th Dec 2020 13:08

@ R M and Co (OP).

Please see the following link:-

https://www.cipp.org.uk/resources/news/eat-out-to-help-out-scheme-post-p...

Is the standard HMRC letter included in the above link the letter received from HMRC at the outset ?

I have uneasy feelings re this case: are you sure that you have seen the entirety of the correspondence with HMRC ?

Frankly, I am not (albeit it is only a possibility) yet convinced, without seeing the entire correspondence, that the email purportedly from HMRC is genuine.

Purely on the basis that the facts supplied by you are complete, there is a serious fundamental flaw in the HMRC approach (as indeed stated by members above). I note the extract, from the HMRC email (impliedly sent to your firm, not to the client) of:-

“It is in your best interests to make a voluntary disclosure. To do this, go to gov.uk and search for “Eat Out to Help Out overclaims” to make a disclosure. We will then tell you how to pay back what you owe. Failure to make a disclosure will result in formal action taken against you, possibly involving statutory interest charges and penalties”.

Importantly, however, again assuming you have given to us the “full story” (no offence is intended by such comment) thus far (i) HMRC have yet provided no evidence that the claim was overstated and (ii) your client has made no admission to HMRC that they have submitted such overclaim. If such be the case, then it is palpably improper for HMRC to INSTRUCT the client to submit a voluntary disclosure: such conduct is indeed in breach of the TMA: and of the “Charter” (albeit the latter has minimal legal effect).

I would however give HMRC the opportunity to support its (currently seemingly bizarre) instruction, in case there is something of which you are unaware. My own approach would be an email to HMRC along the lines of:-

“I note the clear instruction, in your email of xx/xx/xxxx, to submit a voluntary disclosure, and the statement that “Failure” to do so might involve both interest and penalties. There is clearly therefore “something missing” in my understanding of this case since, as you will know, HMRC can only impart such an instruction (and notify the taxpayer of the actions which HMRC may take if those instructions are not followed) after the client has admitted such breach of legislation and/or HMRC have explained, in detail, the purported breach to the client. May I thus request you to forward to me, by return, FULL DETAILS OF THE INFORMATION held by you (albeit not the full information) re the overclaim identified by you”.

How next best to proceed will depend upon the HMRC response. It MAY be necessary to severely reproach HMRC at some point in the future – but, as ever, be conscious of prejudicing the client’s case if in fact there has indeed been an overclaim.

IF it transpires that the HMRC request is, in principle, in order, then most certainly IF its insistence on forwarding the papers by email is unduly onerous, then you are entitled to decline the request on the basis that it is not "reasonable" (and invite them to agree to inspect the papers at your office, if convenient, advising that the inspection must be put on hold if COVID-19 restrictions prevent their attending now).

Basil.

Thanks (1)
Replying to fawltybasil2575:
VAT
By Jason Croke
22nd Dec 2020 16:11

HMRC had a similar approach with furlough claims, they were "suggesting" people who may have made errors/overclaims to make a disclosure and avoid penalties.

Basil is right in that there is process for HMRC to follow, request records, make assessments based on the information supplied (including best judgement if records are patchy), then taxpayer has right to appeal, etc.

Nothing wrong per se in reminding taxpayers to get their taxes right, but indicting the taxpayer is wrong and should 'fess up via a link is poor and wonder if a tax lawyer would rip HMRC apart on this when it comes to due process/taxpayers rights.

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