Restaurants & Takeaways are you prepared? – HMRC might be watching you
VAT in the Food Industry
Recent research carried out by BDO has found out that 26% of businesses which have been named and shamed for intentionally avoiding to pay tax in a list made by HMRC are restaurants.
With increased competition and severe pressure on margins, restaurant businesses dealing in cash find it extremely hard to resist the temptation to under-declaring income to avoid paying Tax, VAT or payroll tax. HMRC has discovered that restaurants are finding ways to hire employees on cash to reduce the PAYE bill, under-declaring income to avoid paying extra tax on profits and VAT. This is made easier for restaurants as most of their sales are in cash. Tools and software’s have also been identified which are being used to prevent any audit trails from being left behind, making it even more attractive to evade tax.
Current examples which highlight these issues include an Indian takeaway in Luton, a Chinese takeaway from Bangor and a pizza restaurant in Middlesbrough, all which avoided taxes worth hundreds of thousands of pounds. All of them were caught by HMRC and now face huge fines.
The other issue which HMRC is actively watching and targeting restaurants for is the misreporting of tips. HMRC loses a large amount of tax on tips paid, which are not being reported to them. HMRC can seek to collect this unpaid tax along with interest and fines from the restaurant. Speak to your accountant if you are unsure about how you can report your tips effectively and what systems can be put in place to make this as cost-effective as possible.
HMRC has set up a variety of task forces just for the restaurant industry who are tackling a range of issues related to misreporting or under the collection of tax. It is therefore essential for restaurants or takeaways seeking the help of Qualified Accounting firms in the UK to be prepared instead of using unqualified individuals who will guide you in the wrong direction. If you, as a restaurant, have some concerns about your accounting or tax, speak to a suitable Tax Accountant to understand the potential risks and any possible ways to mitigate these risks as much as possible. Tax evasion is a criminal offence, and one way to avoid serious prosecution is by Self-reporting to be considered for leniency on the matter.
If you are thinking about starting a restaurant business in the UK, speak to a competitive startup accountant, ask them for legitimate ways to reduce your tax. Set up effective systems and controls which enable you to improve margins by improving productivity, reducing wastage and by monitoring your financials proactively. It might also be high time for you as a startup to work on creating smart, innovative products for the restaurant industry, disruptive solutions which provide alternative ways for businesses to improve margins instead of using questionable techniques.
Clear House Accountants are Startup Accountants in London. We specialize in working with startups and new businesses, helping them lay a strong foundation for their new venture. Our smart tools and practical solutions also enable these businesses to make quick decisions and therefore, grow faster. Please speak to us to see how we can add value to your new venture.
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