Restaurants under Pressure from Tax Authorities

New figures have revealed that hundreds of London restaurants have been targeted by the taxman in a major attempt to crackdown on tax evasion.

According to data obtained under the Freedom of Information Act, there are, in total, 159 restaurants in the capital, and a huge, 531 restaurants nationwide that have been targeted in the last six months. The HM Revenue & Customs tax task force is on quite a mission it would seem.

The restaurants have not been identified; however, it is public knowledge that the amount of unpaid tax involved in the most advanced 45 investigations is already as high as £634,000. The eventual total figure is expected to be well into the millions, and over 20 cases are currently being considered for fraud proceedings.

Many restaurant owners have suggested that they are seen as a “soft target” by tax authorities due to the high levels of cash that are handled by staff in tips every day. Many inspectors have been working undercover, posing as diners, in order to see how the service charge is being handled within the establishments.

In 2005, there was a similar crackdown, known as Operation Gourmet. This resulted in some of London’s best known restaurants coming under investigation, and eventually being fined. However, many then received refunds. For example, two Michelin-starred Pied à Terre was told to pay a fine of £187,000 for wrongly administered tips. This fine was then later reduced to £36,000. This would still however make a dent in the restaurants cashflow figures for the year, and it would also make restaurant insurance UK costs seem all the more expensive.

Meanwhile, French restaurant, Mon Plaisir, which can be found in Covent Garden, chose to go into voluntary liquidation instead of paying a demand for £500,000. They are now back in business however. At the time of the investigation, the restaurant owner was quoted saying: “I know the IR inspectors are just doing their job, but I haven’t done anything illegal.”

Furthermore, high profile, Celebrity Chef, Gordon Ramsay, claimed that his human rights had been abused after he suffered six years of investigations by HM Revenue & Customs. It was reported that no evidence of any wrongdoing was found.

Hopefully we will not see any restaurants being put out of business as a result of this tax investigation!

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