HMRC Targeting Restaurants and Takeaways as Part of Tax Evasion Crackdown

HMRC has been paying particular attention to the activities of restaurants and takeaway food businesses around the country as part of its crackdown on tax evasion.

That’s according to a new set of figures compiled by the accountancy firm BDO, which says that 26 per cent of all the companies ‘named and shamed’ as tax evaders recently were restaurant or takeaway operators.

In terms of the raw numbers, 200 out of the 775 companies officially identified by HMRC as being tax evaders were in the restaurant sector at the last count, with several takeaways in various parts of the country being hit with heavy fines as a consequence.

The view of BDO is that HMRC is focussing attention on restaurant and takeaway businesses because there is believed to be significant scope for the under-declaring of revenues and profits.

Part of the reasoning is that because these types of operation carry out such a high volume of cash transactions there is a relatively strong likelihood that some will attempt to avoid declaring their income properly.

Another reason why restaurant owners might seek to downplay the scale of their revenues is simply that there is so much financial pressure currently on businesses in the sector and margins are being squeezed consistently.

The issue of tips and the processes that restaurant businesses use to record and report them accurately has also been an area of particular interest for HMRC officials recently, according to BDO.

Among the operations that have been named, shamed and hit with sizable fines by HMRC recently are a Chinese takeaway in Bangor, which reportedly defaulted on £158,000 worth of taxes, and an Indian restaurant in Luton, which was accused of dodging some £413,000 worth of taxes.

“HMRC has a range of taskforces now focused on investigating the restaurant industry,” explained Dominic Arnold, a partner at BDO.

“The use of taskforces has proved very effective in the past and businesses need to be aware HMRC is going to continue to throw this kind of concentrated effort at the sector.”