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Inland Revenue tax probe heads north

02 December 2005

Chefs and pub owners in Scotland and the North of England are to be the target of a new Inland Revenue crackdown, according to two leading tax consultants.

Operation Gourmet, the name given to an Inland Revenue purge on tax dodges in the hospitality market, is to be given a new lease of life and shift its focus further north from London and the South-east.

Tax consultant Peter Davies from Vantis confirmed the change of emphasis away from London. "It now seems to be actively focusing on other parts of the country like northern cities or smaller towns that are affluent - as ever, the Revenue goes where the money is," he said.

Operation Gourmet focuses on tronc payments - as set out in the E24 guidelines published earlier this year - and the legality and tax status of payments made to chefs by suppliers to encourage repeat orders.

The investigations will be spearheaded by the recently merged successor to the Inland Revenue, Her Majesty's Revenue and Customs (HMRC).

The investigations are likely to pay more attention to pubs and bars, following the introduction of the new licensing laws last week.

Davies said: "The HMRC will expect pubs that are serving food or staying open later to pay more in taxes, especially PAYE. Operators must make sure their systems are up to scratch and record new sources of income, such as entry charges, or they'll become targets."

Manoj Anand, a senior consultant for tax investigations group Chiltern, also warned the HMRC views tax malpractices in the industry as endemic.

"It takes the view that everyone's ‘on the take' and bases its accusations on information from suppliers, which may not be well recorded and possibly no more than hearsay," he said.

An HMRC spokeswoman denied that Operation Gourmet was being revived. "We don't target particular businesses or areas. We carry out over 30,000 investigations a year as part of compliance," she said.

"We may send standard letters which are tailored towards some industries, but there's not a special operation targeted at the hospitality industry."

Key areas of investigation

  • Tronc management and distribution.
  • Wage bills, including casual staff.
  • Benefits in kind.
  • Supplier relationships at high profile and large restaurants.
  • Ordering procedures.

By Emily Manson

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