Category: HMRC

Records retention in a Restaurant

Basic reckoner is given below:

PAYE for employers 3 years from the end of the tax year they relate to.
Corporation Tax For 6 years from the end of the last company financial year they relate to.
VAT At least 6 years
Self Assessement – PAYE At least 22 months after the end of the tax year the tax return is for.
Self Assessement – Self employed At least 5 years after the 31 January submission deadline of the relevant tax year.
Staff Files 6 years after staff leaving
Sales envelopes 18 months for Charge-backs

Please click the links above to see detailed guidance before taking any action.

Students working in restaurants

Like all individuals working in the UK, students also have to pay tax and National Insurance Contributions (NICs).

But they can claim tax back in two circumstances:

  • UK Students:  If you do not plan to work in another job till coming 5th April, you can claim tax back by completing form P50

 

  • Overseas Students: If you are leaving UK you can claim tax back by completing form P85

 

  • Under the age of 16 : Their National insurance code is X , as National Insurance contributions are not payable for under 16 year olds.

 

Further resources:

HMRC has made an informative You tube video.

CIOT has prepared a very good notes with detailed information,
please visit CIOT website.

 

 

Restaurant Industry – Human Resources Files

Restaurant Industry – How to do Right to Work Checks ?

Restaurant industry has one of the highest levels of staff turnover. Restaurant Managers and Chefs are so busy with day to day operations that this area gets lags behind.

Main hurdles we see from managers:

1 – Lots of paperwork to be collected and issued. How to track them.

2 – Lack of knowledge on which paperwork to collect , when to collect and what to check.

We have prepared a quick MANAGER’S CHECKLIST for the recruiting managers to use while on-boarding staff. This is one of the series of documents we have to help the clients fulfill their obligations relating to `Right to work` checks.

One of the useful tool is the European Union Official website PRADO (free resource) helping recruiting managers to check `Right to Work` documents of a prospective employee.

We advise and help clients in being vigilant in this area and avoid illegal working penalties.

See this Map for the restaurants fined in London this year.

 

HMRC to be preferential Creditor

How are funds distributed among creditors in a restaurant insolvency ?

From 6 April 2020 HMRC will become preferential Creditor in UK insolvencies.

UK treasury has written an easy to read paper on this matter. Explaining the effects of this change and showing hierarchy of distribution of funds in insolvency.

It shows that unsecured creditors like suppliers usually recover 4% of their dues.

I think it’s a good move by the government to secure taxes for the public good.

Restaurant suppliers should make note and negotiate better credit terms.

Claiming Input VAT on Director meals

I am a director, can I claim VAT on my lunch?

Yes, as directors are classified as employees of the business (Notice 700/65 para 2.3) you can recover VAT on lunch.

But as always there a few pot holes down this road to be aware of:

  • Subsistence – A meal taken away from normal place of work on a business trip is allowable.
    (Notice 700 para 12.1.2)

As a guideline, a claim should not be a problem if the business meeting is at least five miles away from the main trading base.

So a meal ordered to your office for lunch is not allowable.

  • Business Purpose – You cannot recover the VAT on meals which are not taken for business purposes (Notice 700 para 12.1.2)

Unfortunately, keeping the director’s tummy full is not a business purpose.

 

  • Exclusive – If the entertainment is provided only for directors or partners of a business the VAT incurred is not input tax. This is because the goods or services are not used for a business purpose. The VAT cannot, therefore, be recovered (Notice 700/65 para 3.2)

Thus, if meal is ordered for director only and not for other staff as well, Input VAT cannot be claimed.

Conversely, VAT can be claimed for employee entertainment like Christmas party when all employees including directors can attend it. Also there is no monetary cap on it.

See also Neil Warren article mentioned below on a planning tip – a small charge for guests.

 

Thus in conclusion, it’s better to avoid claiming Input VAT on meals for directors, unless it can satisfy the above conditions, which in our opinion is a high threshold to cross.

 

Sources: