HMRC cracks down on tax-avoiding restaurants and takeaways
HMRC has put the restaurant sector firmly in its sights as it tries to hit ambitious targets set by the government.
It has ‘named and shamed’ 98 restaurant businesses in a single day, according to accountants Hacker Young.
The firms owe a collective £10.4m in unpaid tax and HMRC has issued them with a total of £9.2m in penalties as part of its enforcement drive.
“HMRC has always treated restaurants and takeaways with a fair bit of suspicion. Now their undertaking this publicly shaming of offenders in the hope it will deter others.”
“The reality is restaurants and takeaways are easy targets for HMRC,” Philip Kinzett-Evans, Partner at UHY Hacker Young, said.
HMRC has been set “ambitious targets” by the Government to increase its number of tax investigators and tax investigations, law firm Pinsent Masons said.
Overall, the extra take from Corporation Tax rose sharply to £6.15bn – from £3.19bn – in the last financial year.
“With the government wanting to raise tax revenues but politically constrained from hiking headline tax rates, ramping up compliance activity is one of the few levers left.
“Individuals and companies are likely to face even greater scrutiny in the next 12 months,” Abigail McGregor, Legal Director at Pinsent Masons, said.
Crackdown is ‘the last thing’ restaurants need
After struggling during the pandemic, the hospitality sector has since been battered by a variety of headwinds, including low consumer spending, high energy bills and rising taxes.
“The hospitality sector has lost nearly 70,000 jobs in the last three months, and restaurant businesses close their doors every week, a HMRC crackdown is the last thing they need,” Peter Davies, client services partner with Moore Kingston Smith, said.
Labour was warned by MPs that the hospitality sector was being ‘taxed out of existence’ earlier this month.
UK Hospitality chief Kate Nicholls has said that hospitality “cannot afford to recruit for summer” with the situation “worse than Covid”.
The lobby group launched a campaign earlier this month called #Taxedout, aiming to reverse a series of policy decisions made in the last year which have severely impacted hospitality.
“HMRC’s focus is likely to include making sure operators are complying with new tipping legislation and paying their staff the Minimum Wage. HMRC will also be trying to ensure that sales made via delivery apps are correctly recorded.
“But regardless of why HMRC may initially visit or investigate a restaurant, that issue won’t be ring-fenced; they’ll take the opportunity to look at all aspects of the business,” Davies said.