HMRC Investigations

Fish and Chip Shops in for a battering.

It has been revealed that HM Revenue and Customs (HMRC) are running an ongoing campaign targeting fish and chip shops.

As a cash business fish and chip shops have always been a favourite for HMRC tax investigations and more and more are going to find an unwanted letter from HMRC on the doormat in the months ahead. So is there anything you can do to protect yourself from enquiry?

Stuart Shaw, head of investigations, at Loucas “HMRC will initially look at the Gross Profit Ratio (GPR) of the shop and compare this to similar businesses in the same region and also look at variations on GPR from year to year.

There could be many reasons for your GPR being out of kilter with the industry average or for inconsistencies year on year. Loucas therefore recommend that explanations are provided when submitting Accounts to HM Revenue and Customs for any anomalies, for example outlining the sector of the market that the shop occupies or  if there has been a change in the nature of the services being provided such as opening or closing a restaurant area.

This will not of course guarantee that you will not be the subject of an HMRC tax enquiry. The best defence in the event of a tax enquiry is to ensure that you have complete and accurate records including all purchase invoices and daily till rolls to support cash book entries.

As part of an enquiry an Inspector may carry out a business economics exercise which will look at purchases and the size of portions to carry out a takings recomputation. It is therefore vital that records are kept of wastage, sales promotions and staff meals/own consumption otherwise you may face a revised sales figure which you cannot contest.”

With penalties for incorrect Returns being anything up to 100% of the tax due it is essential that you keep adequate records and in the event of an enquiry you should always seek the services of a tax professional to help you through it.

If you would like to discuss any of the issues raised in this article please do not hesitate to contact us.

Contact:

Stuart Shaw CTA , Head of Investigations.
Loucas
stuart@loucas.org.uk