Taxman targets illegal payments to chefs
Food pubs are being warned that the taxman is taking a close interest in payments made by suppliers to chefs in return for orders. Her Majesty's Revenue and Customs (HMRC), the new tax authority created by the merger of tbe Inland Revenue and Customs & Excise, is reported to have revived its Operation Gourmet probe into the restaurant trade.
Earlier this year, new guidance on the tax treatment of tips distributed by employers to supplement staff wages was issued. This followed a lengthy legal wrangle between the taxman and the British Hospitality Association, prompted by the original Gourmet investigation.
The new round of enquiries centres on the legal and tax status of payments made to chefs by suppliers to encourage further orders. Suppliers have allegedly told tax investigators that such payments are an 'integral' part of the way they do business.
While the payments have inevitably raised suggestions that chefs are getting illegal 'backhanders', several criminal cases instigated by HMRC - including proceedings against chefs employed at the Houses of Parliament - have been dropped by the Crown Prosecution Service.
There have been accusations of double standards at work, since suppliers have been told that any payments they make are not tax deductible, while chefs have been told payments should be declared and taxed as income.
A HMRC spokesman told The Publican that its investigations of the trade continue, but would not say whether the focus had changed. "All payments must be properly recorded and declared for tax puposes," he added. Manoj Anand, a senior consultant with tax advisor Chiltern, said: "While HMRC has not initiated any new enquiries under Operation Gourmet for some time, the department running the investigation has been busy collecting information to arm itself for the next phase.
"Furthermore, since the investigative elements of the formerly separate direct and indirect tax teams are now a single entity, the team at HMRC is now more organised and better resourced to take Operation Gourmet to its next phase."
Mr Anand added that food operators would be "well advised to seek specialist advice to ensure that their affairs are in order and should seriously consider making a voluntary disclosure of any tax irregularities which may exist." However, Nick Vadis, national vice chariman of the Craft Guild of Chefs, said that such under-the-counter payments are rare. "It's a high-risk activity," he said, "and you'd have to be pretty stupid to risk losing your job for the sake of taking a bung.
"Most companies now use nominated suppliers, with agreed prices. The only place it could really happen is in the independent sector, but I really believe most chefs would rather negotiate better prices or higher quality produce from suppliers."
