You know what? I’m going to be that accountant today.

The one who’s a right pain about VAT.

The one who asks awkward questions and wants to see the receipts.

The one who, when you suggest a creative approach to your VAT return, goes very quiet.

I have a reason for being that person.

It involves a story from Glasgow that I keep coming back to, and one that I think every hospitality business owner should know about.

 

 

A couple of months ago two Glasgow restaurateurs, Antonio Carbajosa and Kevin Campbell, were each jailed for three years.

They’d run a collection of well-known venues across the city, including Cranside Kitchen, Halloumi and Pickled Ginger.

Lovely places. Busy places. Places with real followings.

For five years, between 2011 and 2016, they systematically understated their sales figures on their VAT returns.

And not by a little bit, either. The total VAT shortfall, when HMRC’s investigators had finished going through everything, came to £682,882.

It turned out that three of their businesses weren’t even registered for VAT, despite trading well above the threshold.

HMRC launched a full investigation. Forensic accountants, years of records, the lot. The judge described what the pair had done as planned and relatively sophisticated, and noted that it had given their businesses a competitive edge over other restaurants who’d done things properly.

Due to that extra £683k, they could pay their staff, cover their costs, and draw higher wages from all that money that should have been going to HMRC.

Their accountant, Khalid Javid, also admitted his part in it. He pleaded guilty to recklessly submitting false VAT returns for two of the companies.

(Interestingly, he doesn’t appear to have profited personally, but that made no difference to the outcome. He avoided a prison sentence, but he’ll be doing unpaid work in the community for what he did. I don’t think it’s a stretch to say that his career as an accountant won’t recover.)

 

 

Now. Before I go any further, let me say something really obvious.

Running a hospitality business in the UK right now is genuinely hard.

Margins are getting squeezed from every direction.

Rising energy and food costs, staffing, business rates.

VAT at 20% on most of your income is a significant chunk of money, and I totally get why it can feel brutal, particularly when you’re working eighteen-hour days and don’t know if you’ll break even this month.

The pressure is real. In just the first quarter of this year, 762 hospitality businesses entered insolvency, and one in five venues report worrying about closure within the next 12 months. We’ve all seen familiar names fold. This isn’t some problem ‘out there’ that we can ignore.

But here’s the thing about VAT: it was never your money.

The moment a customer pays you, a portion of that payment belongs to HMRC. It’s only passing through your hands on the way to them.

It isn’t yours to spend, to borrow against, or to quietly keep. The businesses in Glasgow didn’t just evade tax. They spent five years running their operations on money that didn’t belong to them. When HMRC came knocking, there was nearly £700,000 to account for.

That’s the gap between “tight margins” and “fraud.” And it’s a gap that, once crossed, can be very difficult to come back from.

What the VAT rules actually mean for hospitality

For most hospitality businesses, the VAT position is fairly straightforward, even if it doesn’t always feel that way.

Food and drink consumed on your premises is standard-rated at 20%. Hot takeaway food is also standard-rated. Cold takeaway food, like a wrapped sandwich or a cake to go, is generally zero-rated, which is where it can get complicated.

Your product mix, and whether things are consumed on or off the premises, can affect your overall VAT liability in ways that aren’t immediately obvious.

The flat rate scheme exists for smaller businesses and can simplify things considerably.

Whether you’re better off on flat rate or standard VAT depends on your specific mix of sales and costs, and it’s genuinely worth a conversation with a good accountant rather than a quick ChatGPT and a prayer.

 

 

Something I’ve been seeing on social media

I also want to mention something, because it’s been doing the rounds in accountancy circles, and I want you to hear it from me before you see it somewhere less reliable.

There are paid adverts running on Facebook and Instagram targeting any VAT-registered business, not just hospitality. The ads promise guaranteed monthly VAT claims of £50,000 or more, using what they describe as “proven loopholes”.

One I’ve seen claimed to work through an “inside HMRC inspector”, ensuring guaranteed approvals with no delays and no denials.

I’ll let you sit with that one for a wee sec.

When accountants have dug into these companies, the pattern tends to be the same: a recently registered domain name, a website that turns out to be a near-copy of one belonging to a legit firm’s site, a Companies House filing showing £0 turnover and no staff, and a residential address.

The professional veneer is so thin it’s practically see-through.

There isn’t a legitimate route here.

There are no loopholes that guarantee £50,000 a month back from HMRC.

There are no “inside inspectors”.

What there is, in most cases, is fraud. Sometimes outright and sometimes dressed up as a loan to pay your VAT bill, marketed as though it’s a saving.

Either way, the thing those businesses are “missing” is the part where HMRC catches up with them.

I’m not telling you this to scare you. I’m telling you because if something sounds like a way of getting money back from HMRC that nobody else seems to know about, it’s worth being very cautious about it.

And worth having a chat with a qualified accountant before you sign anything.

 

 

What to do if you’re worried about your VAT position

If any of this has made you think, “Hmm, I’m not sure we’ve been doing this quite right”, please, don’t ignore that feeling.

HMRC does allow for voluntary disclosure, and coming forward yourself is always a better position than being found.

An accountant can help you work out what the actual liability is, how to approach HMRC, and what a realistic repayment arrangement looks like.

These conversations are uncomfortable, I know, but they are very much survivable.

A fraud investigation five years down the line? Not so much.

And if you’re starting a hospitality business, or you’ve been running one and you’re not quite sure your VAT setup is right, a Clarity Session might be a good place to start.

It’s a focused, one-off conversation to look at your specific situation and work out what, if anything, needs attention.

And if you’re looking for something ongoing, we’re open to new clients. Head to our waiting room and tell us a bit about you.

Asking the boring questions now is exactly what we’re here for.

Be you. Be brave. Build a better business.

Gillian x