Joe Lennon FCCA discusses how restaurants are on HMRC's radar for tax evasion and why you need to manage your accounting records effectively.
Restaurants and takeaways appear to be on the HMRC crackdown list when it comes to weeding out tax evasion. We've witnessed the tax authorities focus on several different industries over the last few years in an attempt to clamp down on those under-declaring their tax liabilities.
According to BDO, "Restaurants and takeaways make up 26% (200 of 775)* of businesses 'named and shamed' by HMRC as 'deliberate tax defaulters' since they began the list in December 2017."
The restaurant industry could be seen as an "easy target" for HMRC. This is because of the considerable amount of cash transactions that take place in the trade. It doesn't mean that all businesses in this industry are partaking in tax avoidance.
Factors such as the stresses of Brexit, business rates, and market saturation have created an unpredictable time for restaurants. The assumption from HMRC is that the 'desperate times can call for desperate measures'. Consequently the taxman is on the hunt for businesses joining in on the act of evasion.
In times like these it's not unheard of to witness businesses in a struggling market feel compelled to make panic-stricken decisions to cut costs and save money. An HMRC spokesperson states:
As we've seen in the past, HMRC is no stranger to combining high-tech and more traditional practices to uncover tax evasion methods. These include special taskforces and collecting data directly from payment terminals for cross referencing with existing records. It's also been noted that HMRC has a particular interest in taxes lost through tips.