Tax clampdown targets restaurants for starters


North West restaurant businesses are being urged to ensure their tax affairs are in order after the Government announced a new task force to tackle tax evasion in the sector.


HM Revenue and Customs (HMRC) said it will begin targeting the restaurant trade in North West England, as well as Scotland and London, with “intensive bursts of compliance activity” in the first of a series clampdowns on ‘high risk’ sectors.


David Bennett, tax partner at Moore and Smalley, said restaurant businesses should ensure their procedures and tax records are in order as the number of spot check investigations will increase.


He said: “The tax man sees the restaurant trade as a high risk area because restaurants have a high proportion of cash transactions and wages and tips are often paid in cash. Where profit ratios or wage costs shown in the accounts are out of line with industry averages, for example, HMRC may target the business for investigation.


“HMRC will usually give around 10 days notice of an inspection, but can turn up unannounced, so it is imperative that all businesses have the correct procedures in place and that their records can stand up robustly to an investigation. Business owners should contact their professional advisers immediately if HMRC give notice of a visit.”


David said honest businesses have little to worry about if they can prove any minor discrepancies are honest mistakes, but warned that HMRC is likely to take a “cynical” view where mistakes appear deliberate.


HMRC’s new task forces are a result of the Government’s £900million spending review investment to tackle tax evasion, avoidance and fraud from 2011/12, which aims to raise an additional £7billion in tax revenue each year by 2014/15. It is planning a further nine task forces to look at specific sectors in 2011/12, with more to follow in 2012/13.