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Operation Gourmet blunder leaves a bad taste, says David Moore

27 February 2006

The Revenue's shock revelation that its Operation Gourmet crackdown on restaurant troncs was based on a flawed policy brings scant comfort to its victims, despite their opportunity to demand refunds. David Moore, proprietor of London restaurant Pied à Terre, argues for more respect and clearer guidelines from the Revenue.

A business under investigation by HM Revenue & Customs (HMRC) can expect it to take years to resolve - just about enough time for it to warrant a further investigation. So I was told by an inspector at a London Revenue seminar I spoke at after we settled our tronc issue.

Our investigation was supposedly ‘random'. The rumours about Operation Gourmet were rife and I believe HMRC was looking for a few big names to kick off with.

"We just want to give you a health check" was one of the phrases we heard. We traded a few punches over uniforms with and without logos, a van used for Covent Garden market, and some alleged benefits in kind, but we realised they were mainly interested in the tronc.

Then the letter came: "There is a basket of indicators that demonstrate you have not been following the guidelines and you owe six years national insurance contributions (NIC) on both employee and employer contributions". Basically, that's 20% or more of your tronc for the past six years, not forgetting interest.

Does HMRC have any idea what it is like to be investigated? No, I don't think so. Do they have any idea of the cost to the business in terms of professional advice and management time?

During our investigation the Revenue took an average of seven weeks to reply to our correspondence. The investigation loomed over everything we did, the money we owed could have put us out of business and we could easily have wondered what was the point of carrying on.

But carry on we did, creating duty on every bottle of wine and spirit we sell, collecting 17.5% on our total sales for the Government, collecting tax and NIC on wages, and hopefully paying corporation tax on our profits. Did you hear us complain? No.

Why does the HMRC do this to us? I think because it is easy and they can.

HMRC should have clear, unambiguous guidelines in a language that we all understand. And why couldn't the HMRC aim to visit all new Tronc Masters in their first year of operation on a friendly ‘let's get it right basis'.

We in the industry also need to sharpen up our game. Never allow inspectors to start a ‘random' check without your financial advisor being present - in my opinion your advisor should answer all questions. Our job is serving food, not playing games with HMRC; do what you do best and pay someone to do the other jobs.

The trade press, too, should be more proactive with information on guidelines, help lines and web pages in different languages. It should champion the trade and not just comment on it.

So HMRC has climbed down on some aspects of the regulations, but do you know what aspects? I am told that we might be up for a refund on the NIC that we paid. I am not holding my breath. Even if we did get a refund, it would not cover the massive expenses we incurred defending ourselves.

Our industry should be treated with respect by the HMRC. ‘Could do better!' would be my school report for all concerned, but I strongly believe that the HRMC should be leading the way with a proactive approach. As we all know, prevention is better than cure!

Pied a Terre finally agreed a settlement of £30,000 with the Revenue, which was initially demanding £187,000 in NIC.

Next week, we hear from another Operation Gourmet victim, Hardy's in Marylebone, in a report that catalogues a diary of non-joined up thinking at HMRC.

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