Eat Out to Help Out: HMRC fraud compliance checks

HMRC sends nudge letters to 4,000 hospitality businesses opening compliance checks into their claims in the government’s Eat Out to Help Out scheme. Fraudulent claims can lead to HMRC conducting a formal investigation and taking criminal action or issuing a considerable penalty assessment. If you are a company who has participated in the scheme and need legal advice, get in touch with our tax team.

In August 2020, in an attempt to boost the hospitality sector, the government offered 50% to consumers who ate out at restaurants that were registered with the Eat Out to Help Out scheme. More than 84,000 businesses took part in the scheme until it was closed on 1 September 2020.

What is Eat Out to Help Out fraud?

The ways in which a company could commit fraud or abuse of the Eat Out to Help Out scheme include:

  • A company being ineligible to make a claim under the Eat Out to Help Out scheme
  • A company claiming for more payments than it was entitled to based on the information HMRC holds about the business i.e. the amounts claimed and the payments the business has received
  • A company providing incorrect or fraudulent information to HMRC

What are the consequences of committing fraud?

Criminal action can be taken against individuals who commit fraud including fines and imprisonment. Arrests for fraud were in fact made at the start of this month following HMRC’s investigations.

HMRC can also take action such as issuing hefty penalty assessments to businesses who they deem to have failed to comply or deliberately abused the system.

The vast majority of businesses will have used Eat Out to Help Out responsibly but we will not hesitate to act where we suspect abuse of the scheme

Kath Doyle, Deputy director of HMRC’s fraud investigation service

What is a compliance check or tax investigation?

A compliance check is an enquiry conducted by HMRC into the tax affairs and tax payment history of any UK individual, employee, director or company. A HMRC tax investigation can come in many forms and covers a range of taxes covered under HMRC jurisdiction such as: VAT; income tax; corporation tax and capital gains tax and in this case with tax support payments granted to businesses as a result of the coronavirus pandemic e.g. the Coronavirus Job Retention Scheme (“CJRS”) i.e. furlough scheme.

How HMRC does carry out a compliance check?

The type and severity of the investigation is completely dependent on the facts of any individual case. Typically, an investigation generally commences when HMRC notice irregularities in information supplied via a Self Assessment Tax return. A taxpayer will receive a letter from HMRC informing  them that an investigation has been opened into their tax affairs and may include a request for information.

Businesses will have 60 days to respond to HMRC’s letter opening a compliance check and provide HMRC with any requested information. Failure to provide the requested information or correct information may result in HMRC issuing a penalty notice.

It is strongly recommended that you consult a tax lawyer as soon as possible to receive detailed advice on how to take control of the situation and negotiate with HMRC.

Which sales are eligible for Eat Out to Help Out ?

The discount can be applied to food and/or non-alcoholic drink purchased for immediate consumption on premises, up to a maximum discount of £10 per diner (inclusive of VAT).

This includes soft drinks and/or packaged snacks, as long as they are for immediate consumption on the premises.

There is no minimum spend requirement.

Which sales are ineligible for Eat Out to Help Out ?

The discount cannot be applied to the following items:

  • alcoholic drinks
  • tobacco products
  • food or drink that is to be consumed off premises
  • food or drink that is sold as part of a private party, event or function taking place within an eligible establishment

Can I appeal against a tax investigation being commenced?

No, you cannot appeal against an investigation being opened. You must cooperate with HMRC as much as possible and it is recommended to seek legal advice as soon as possible.

Once HMRC have concluded their investigation, they may issue a penalty assessment following which you have 30 days to appeal the decision. You can appeal in writing by giving Notice of Appeal to HMRC. HMRC will either confirm their first decision, amend their decision or agree with your assessment.

What is voluntary disclosure?

HMRC campaigns encourage taxpayers that have undeclared income to voluntarily disclose their undeclared earnings or additional incomeIn return, HMRC will usually be more lenient when it comes to potential penalties on those who come forward and voluntarily disclose their financial information.

It is important to cooperate with HMRC as much as possible during a compliance check and seek legal advice at the outset to understand your position as it may be advisable or necessary to give a voluntary disclosure to HMRC.

Expert London Tax Investigation Lawyers

If you need HMRC Tax Investigation advice, we are available to aid you at every stage of the HMRC investigate process. Members of our legal team have first-hand experience and knowledge of the internal workings of HMRC. We can provide you with the very best representation in negotiations with HMRC and defending all forms of HMRC fraud, tax inquiry, tax fraud investigation, criminal tax evasion and HMRC enquiries and investigations. Our team specialises in successfully challenging HMRC decisions and will assist you in every aspect of the investigation.

Our specialist Tax Solicitors and Barristers deliver expert technical knowledge, strong negotiation skills and respected advice, which can make a pronounced difference to eventual tax penalties, charges and liability.

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