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HMRC targets restaurant tax evasion

13th May 2011
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HMRC has set its sights on restaurant owners in London who are deliberately evading paying tax as part of a new “industry specific” team approach.

The new plan involves getting a team skilled up in a particular sector and then hitting that sector en masse, imposing high penalties and conducting prosecutions.

AccountingWEB tax editor, Rebecca Benneyworth, was upbeat about the crackdown: “I think this is a sensible approach by HMRC as the team will establish where the risk factors are and learn more about the industry as they work, enabling them to be more effective.

“It is a very sensible use of resources, and enables the team to keep up the pressure on the sector through in-depth knowledge of how the business works – gained by working in the SME sector for an extended period of time.”

The tax evasion taskforce is initially focusing solely in London, but will be rolled out to Scotland and the North West shortly. Over the next year there will be a further nine task forces, with more to follow in 2012/2013.

The tax evasion plan forms part of the government’s £900m spending review to tackle tax evasion, avoidance and fraud. Paul Roberts, head of Tax Investigations at Grant Thornton UK, said: "One thing is for sure, HMRC is not losing momentum in its pledge to focus on tax evasion and raise an extra £7bn each year by 2014/15.

"It remains to be seen how much this will raise and indeed how HMRC will undertake this when it has had its own resources restricted during the spending cuts.”

Gary Ashford, chairman of the CIOT’s Management of Taxes Sub-Committee, added a further word of caution: “HMRC have a range of sources of evidence available to them and we assume that they have been doing their homework so they can target their anti-evasion efforts. Careful targeting is needed as the one fear with this initiative is that those who make genuine mistakes over their tax affairs might be caught up in this drive.”

AccountingWEB members were also quick to comment on the new clampdown with more scepticism, referring to the plan as “superficial”, adding that “if it is a policy which can be undertaken ‘swiftly and effectively’ then why on earth hasn’t HMRC being doing it for years?”

Restaurateurs will need to ensure that their accounting records are kept up-to-date and stand the test of rigorous scrutiny. Earlier this year HMRC announced it was offering the plumbing trade a tax amnesty. The reduced penalty rate for coming clean on undeclared tax is also on offer to those outside the plumbing trade and is open until the end of May.

Ashford also added: “Those in the restaurant trade with overseas assets may want to look at whether they might also benefit from the other current disclosure facility, the Liechtenstein Disclosure Facility, which, in some circumstances, is the best option available for those making disclosures to HMRC.”

Replies (4)

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16th May 2011 12:06

Restaurant tax evasion

I think this may be a 3 pronged issue :

1. Cash business so there is scope for evasion of VAT and income/corporation taxes

2. Illegal migrant workers and the associated fines / how they are being paid

3. Paying PAYE workers "off books" part of their wages in order that the tax credit system can be defrauded ; an area I personally feel needs serious consideration and investigation by HMRC as not only are taxes being evaded but benefits being claimed ; i.e. 2 fold .

This is long overdue from HMRC and should be country wide .

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By mark.wmlockhart
16th May 2011 14:02

Restuarant tax evasion

Can anyone enlighten us on what HMRC will consider a "restaurant" to be in their campaign? Will high risk mean that they will target the takeaways rather than the traditional restaurant?

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Nichola Ross Martin
By Nichola Ross Martin
16th May 2011 14:15

What's new?

It does not take a lot to realise that the combination of a cash turnover and cash employers is a high risk but given that every other premises in any large city is selling food, does HMRC really have the staff to ever make a significant difference in this sector? 

Virtual Tax Support for accountants:

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By johnjenkins
17th May 2011 09:26

Customs and Excise

have been doing this for years. Remember the pea counting scenario etc etc?

What worries me, and no doubt I will be shot down by some, is that tax AVOIDANCE (which is LEGAL) has been lumped in with Tax EVASION and FRAUD (illegal). If HMRC stick to fraud and evasion they might actually get a decent result.

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