Ensure robust systems in place for handling tips, accountants say
RESTAURATEURS must ensure they have robust systems in place for handling staff tips after HM Revenue and Customs revealed plans to target the sector as part of a crack-down on tax dodgers. Accountants advised operators to make sure staff are paying the correct rate of tax, accounting records are kept up to date and tips are processed correctly.
The warning came as HMRC confirmed a task force will visit restaurants, which it described as a “high risk” sector, in Scotland, London and north east England as part of the clamp-down on tax evasion. Although it has stressed “honest businesses have absolutely nothing to worry about”, accountancy firms warned operators to double-check they have the correct procedures in place.
“Restaurateurs will need to ensure that their accounting records are kept up to date and stand the test of rigorous scrutiny,” said Mark Tenby, partner at Martin Aitken. “HMRC will focus on tax evasion through unrecorded cash sales, the incorrect treatment of tips, illegal workers and benefit fraud. They have stated that honest businesses have absolutely nothing to worry about. That remains to be seen, as one fear with this initiative is that those who make genuine mistakes over their tax affairs might get caught up in this drive.”
However, Ian McDougall, of McDougall Johnstone, said he would be surprised if HMRC came down heavily on restaurateurs who had made a genuine error. “They [HMRC] are more likely to seek the tax, interest and penalties, although the penalties can be up to 100% of the tax,” he said. “I don’t think many restaurant owners actively seek to defraud the tax authorities as most customers pay with cards and tills are so much more automated these days the practice of not declaring income is greatly reduced. Just ensure your staff are paying the correct amount of tax and that you have a robust system that treats tips correctly.”