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close up of burger | accountingweb | Honest Burgers survives HMRC grilling over unpaid tax bill
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Honest Burgers survives grilling over unpaid tax

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As HMRC ramps up recovery of pandemic-era tax bills, a popular burger chain said it was shocked at the speed at which tax officials hit it with a winding-up order, despite negotiating an extension in good faith.

6th Dec 2023
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Fast-food chain Honest Burgers has taken a bite out of HMRC for ignoring a request to extend repayment terms of a tax bill.

The high-street restaurant was issued with a winding-up petition by tax officials last week, and narrowly avoided being forced into compulsory liquidation after it paid up in full two days later.

The chain, which has 40 outlets and around 700 staff, had been negotiating a renewal of its Time to Pay (TTP) agreement, which would have given it more time to settle its bill.

However, the talks fell through and HMRC handed the business a winding-up petition court order, which shocked the business as it assumed it had a wider window.

“HMRC had indicated it would be six weeks before legal proceedings were issued for the business to be wound up. But a petition was filed at court less than a week later,” a spokesman for the firm said.

The chain said it quickly paid up, and criticised HMRC for its aggressive approach.

Bun fight

“If we could deliver burgers half as quickly as HMRC delivers petitions, our like-for-like sales growth would be even higher than the 20% we are seeing now,” the spokesman said.

“Like many hospitality businesses, Honest Burgers has benefited from TTP agreements and was negotiating a renewal with HMRC, supported by expert advisers, to maximise cashflow. We asked for a renewal. They said ‘no’. We paid in full two days later, despite being told we had six weeks before they’d actually post a petition. The petition was removed,” Honest Burgers said.

A recent crowdfunding round raised £3m, and the group said it is “now back growing the business” in an attempt to “challenge the big guys” with a move into the quick-service restaurant (QSR) space.

Clamping down with relish

The Sunday Times first broke the story​​ that HMRC is “clamping down” on TTP deals. 

A majority of the debts extend back to the pandemic, when the tax inspectorate used such arrangements to avoid forcing companies into bankruptcy.

“We take a supportive approach to dealing with customers who have tax debts and only file winding-up petitions once we’ve exhausted all other options, in order to protect taxpayers’ money,” a spokesperson for HMRC said.

Officials are said to be working through a backlog of unpaid bills.

Insolvency experts said they were also taken back by the nature of HMRC’s approach in this case given the two sides were still negotiating.

“The logic of this defeats me,” said business transformation expert Shaun Taylor. “How is issuing a winding-up petition and putting 700 jobs at risk in the best interest of anyone?”

Restructuring and insolvency expert Jahmmal Thomas, co-founder and managing director of Gambit Search, said other high-profile names may be next on the list as HMRC “ups the intensity”.

“HMRC seems to be going to efforts to get through a backlog of outstanding payments, which have become more apparent since the pandemic,” Thomas said.

Avoiding a pickle

TTP arrangements generally give firms a timeframe of 12 months to repay HMRC in monthly instalments, accounting experts said, but businesses with larger liabilities may want to get in front of the issue and make HMRC aware of issues as quickly as possible.

“Some TTP arrangements may take longer periods depending on the circumstances facing your business and affordability,” said Ben Westoby of Forbes Burton turnaround experts. 

“It is worth noting that this payment will have to be made alongside any new or current payments to HMRC and you should bear this in mind when you’re looking at whether you can afford the plan,” Westoby said.

“It is also important and helpful that you have a little knowledge on the process involved in a TTP arrangement before diving into it as a way to bring your debt payments up to date, as well as the possibilities of HMRC actually accepting a TTP arrangement,” he added.

Honest Burgers’ experience aside, additional time can usually be negotiated by providing an actual repayment offer and case in written form, alongside copies of a cashflow forecast.

“You will also be required to explain why you cannot pay the amount owed, as well as the amount you can offer as a monthly payment,” Westoby said. “When requesting more time, being honest about the amount your organisation can afford is very important. Ensure you don’t exaggerate this figure.”

Bah humbug

The timing of HMRC’s enforcement drive couldn’t be worse for many restaurants and pubs, with independents reporting a 40% drop in Christmas bookings, according to a confidence survey from industry analysts CGA.

Huge numbers are still recovering from the pandemic crunch, with Brexit staffing woes and the ongoing cost-of-living crisis.

January and February are traditionally the slowest months of the year for the sector, according to trade body UKHospitality, as consumers struggle with December spending and often avoid going out.

An average of five restaurants closed each day in the first three months of 2023, with 569 businesses filing for insolvency in the first quarter, marking the highest rate of British restaurant closures in a decade, according to insolvency statistics from Mazars.

Replies (13)

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By Justin Bryant
06th Dec 2023 12:52

Surely some simple ketchup payments could have helped them meat this liability, unless of course that did not cut the mustard with HMRC.

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By neiltonks
06th Dec 2023 14:24

Since they could afford to pay the sum due, in full, at a few days notice I suppose some might say they didn't need the TTP arrangement anyway!

Thanks (6)
Replying to neiltonks:
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By Justin Bryant
06th Dec 2023 15:16

I really think you should mince your words here.

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Replying to Justin Bryant:
paddle steamer
By DJKL
06th Dec 2023 16:43

They did not relish the outcome.

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Replying to DJKL:
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By Justin Bryant
06th Dec 2023 17:27

Especially after HMRC rejected their initial 25p in the pound offer apparently.

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Replying to Justin Bryant:
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By FactChecker
06th Dec 2023 18:52

HMRC didn't appreciate the BOGOF letter from taxpayer?

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Replying to neiltonks:
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By b.clarke
07th Dec 2023 09:39

Too many taxpayers (and, I suspect too many advisers) tend to forget that HMRC is not a bank or finance house. And they have no interest in behaving like one.

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By JohnB
07th Dec 2023 09:44

Hope that HMRC starts to apply the same energy to recovering fraudulent claims and non-repayment of BB loans during COVID. The Guardian estimated the amount to be 'up to £16bn'. Even to our masters that is not inconsiderable.

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Replying to JohnB:
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By gillybean04
08th Dec 2023 00:34

I'd much prefer HMRC to focus on meeting their own responsibilities before they start trying to meet the responsibilities of other departments.

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David Ross
By davidross
07th Dec 2023 09:53

"negotiating a renewal with HMRC, supported by expert advisers, to maximise cashflow"

Looks like they have the cash to pay their VAT (which they have been collecting from customers on behalf of HMRC) but cynically want to use time to pay. They're also using "crowd funding" - on what terms?

No sympathy from me

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By Duggimon
07th Dec 2023 10:23

The use of the TTP arrangement seems to be an attempt at a cheap or free loan for a company that had the cash to meet its obligations but didn't want to. The debt has been owed for over two years and was still not settled.

HMRC's job is to collect tax that's rightly due, it's nice to see them actually doing it.

Thanks (3)
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By sammerchant
07th Dec 2023 13:32

I wish HMRC would deal with the Agents' and taxpayers' queries/letters etc with as much alacrity!

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Replying to sammerchant:
By Duggimon
11th Dec 2023 08:59

The tax debts in question arose during the pandemic, it's a sad condemnation of the state of HMRC that 2-3 years to resolve is now seen as alacrity!

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